Correlation Between KMH Hitech and Green Cross

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

Diversification Opportunities for KMH Hitech and Green Cross

0.85

Correlation Coefficient

KMH Hitech  Green Cross

Very poor diversification

The 3 months correlation between KMH and Green is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and Green Cross Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cross Medical 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 Green Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cross Medical has no effect on the direction of KMH Hitech i.e., KMH Hitech and Green Cross go up and down completely randomly.

Pair Corralation between KMH Hitech and Green Cross

Assuming the 90 days trading horizon KMH Hitech is expected to generate 1.82 times less return on investment than Green Cross. But when comparing it to its historical volatility, KMH Hitech Co is 2.69 times less risky than Green Cross. It trades about 0.68 of its potential returns per unit of risk. Green Cross Medical is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  313,000  in Green Cross Medical on October 10, 2024 and sell it today you would earn a total of  132,500  from holding Green Cross Medical or generate 42.33% 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.  Green Cross Medical

KMH Hitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KMH Hitech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KMH Hitech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Green Cross Medical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cross Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Green Cross is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KMH Hitech and Green Cross

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

The idea behind KMH Hitech Co and Green Cross Medical 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .