Correlation Between KMH Hitech and ABOV Semiconductor

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

Diversification Opportunities for KMH Hitech and ABOV Semiconductor

0.84

Correlation Coefficient

KMH Hitech  ABOV Semiconductor

Very poor diversification

The 3 months correlation between KMH and ABOV is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and ABOV Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABOV Semiconductor 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 ABOV Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABOV Semiconductor has no effect on the direction of KMH Hitech i.e., KMH Hitech and ABOV Semiconductor go up and down completely randomly.

Pair Corralation between KMH Hitech and ABOV Semiconductor

Assuming the 90 days trading horizon KMH Hitech is expected to generate 7.09 times less return on investment than ABOV Semiconductor. But when comparing it to its historical volatility, KMH Hitech Co is 3.64 times less risky than ABOV Semiconductor. It trades about 0.09 of its potential returns per unit of risk. ABOV Semiconductor Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  775,551  in ABOV Semiconductor Co on December 22, 2024 and sell it today you would earn a total of  502,449  from holding ABOV Semiconductor Co or generate 64.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

KMH Hitech Co  vs.  ABOV Semiconductor Co

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.

ABOV Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABOV Semiconductor Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABOV Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KMH Hitech and ABOV Semiconductor

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

The idea behind KMH Hitech Co and ABOV Semiconductor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.