Correlation Between KMH Hitech and Phoenix Materials

Can any of the company-specific risk be diversified away by investing in both KMH Hitech and Phoenix Materials at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KMH Hitech and Phoenix Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KMH Hitech Co and Phoenix Materials Co, you can compare the effects of market volatilities on KMH Hitech and Phoenix Materials and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KMH Hitech with a short position of Phoenix Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMH Hitech and Phoenix Materials.

Diversification Opportunities for KMH Hitech and Phoenix Materials

0.0

Correlation Coefficient

KMH Hitech  Phoenix Materials

Pay attention - limited upside

The 3 months correlation between KMH and Phoenix is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and Phoenix Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Materials and KMH Hitech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KMH Hitech Co are associated (or correlated) with Phoenix Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Materials has no effect on the direction of KMH Hitech i.e., KMH Hitech and Phoenix Materials go up and down completely randomly.

Pair Corralation between KMH Hitech and Phoenix Materials

Assuming the 90 days trading horizon KMH Hitech Co is expected to generate 0.33 times more return on investment than Phoenix Materials. However, KMH Hitech Co is 3.08 times less risky than Phoenix Materials. It trades about 0.09 of its potential returns per unit of risk. Phoenix Materials Co is currently generating about -0.04 per unit of risk. If you would invest  90,700  in KMH Hitech Co on December 24, 2024 and sell it today you would earn a total of  6,600  from holding KMH Hitech Co or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KMH Hitech Co  vs.  Phoenix Materials Co

KMH Hitech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KMH Hitech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Phoenix Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phoenix Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KMH Hitech and Phoenix Materials

The main advantage of trading using opposite KMH Hitech and Phoenix Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMH Hitech position performs unexpectedly, Phoenix Materials can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Phoenix Materials will offset losses from the drop in Phoenix Materials' long position.

The idea behind KMH Hitech Co and Phoenix Materials Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.