Correlation Between KMH Hitech and HANA Micron

Can any of the company-specific risk be diversified away by investing in both KMH Hitech and HANA Micron 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 HANA Micron 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 HANA Micron, you can compare the effects of market volatilities on KMH Hitech and HANA Micron 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 HANA Micron. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMH Hitech and HANA Micron.

Diversification Opportunities for KMH Hitech and HANA Micron

0.82

Correlation Coefficient

KMH Hitech  HANA Micron

Very poor diversification

The 3 months correlation between KMH and HANA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and HANA Micron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANA Micron 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 HANA Micron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANA Micron has no effect on the direction of KMH Hitech i.e., KMH Hitech and HANA Micron go up and down completely randomly.

Pair Corralation between KMH Hitech and HANA Micron

Assuming the 90 days trading horizon KMH Hitech is expected to generate 4.62 times less return on investment than HANA Micron. But when comparing it to its historical volatility, KMH Hitech Co is 2.96 times less risky than HANA Micron. It trades about 0.09 of its potential returns per unit of risk. HANA Micron is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  973,197  in HANA Micron on December 22, 2024 and sell it today you would earn a total of  374,803  from holding HANA Micron or generate 38.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

KMH Hitech Co  vs.  HANA Micron

KMH Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 7 (%) 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.

HANA Micron

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HANA Micron are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HANA Micron sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KMH Hitech and HANA Micron

The main advantage of trading using opposite KMH Hitech and HANA Micron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMH Hitech position performs unexpectedly, HANA Micron 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 HANA Micron will offset losses from the drop in HANA Micron's long position.

The idea behind KMH Hitech Co and HANA Micron 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.