Correlation Between INSUN Environmental and Kbi Metal

Can any of the company-specific risk be diversified away by investing in both INSUN Environmental and Kbi Metal 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 INSUN Environmental and Kbi Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INSUN Environmental New and Kbi Metal Co, you can compare the effects of market volatilities on INSUN Environmental and Kbi Metal 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 INSUN Environmental with a short position of Kbi Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSUN Environmental and Kbi Metal.

Diversification Opportunities for INSUN Environmental and Kbi Metal

0.61

Correlation Coefficient

INSUN Environmental  Kbi Metal

Poor diversification

The 3 months correlation between INSUN and Kbi is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding INSUN Environmental New and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and INSUN Environmental 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 INSUN Environmental New are associated (or correlated) with Kbi Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kbi Metal has no effect on the direction of INSUN Environmental i.e., INSUN Environmental and Kbi Metal go up and down completely randomly.

Pair Corralation between INSUN Environmental and Kbi Metal

Assuming the 90 days trading horizon INSUN Environmental New is expected to under-perform the Kbi Metal. But the stock apears to be less risky and, when comparing its historical volatility, INSUN Environmental New is 2.19 times less risky than Kbi Metal. The stock trades about -0.11 of its potential returns per unit of risk. The Kbi Metal Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  204,500  in Kbi Metal Co on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Kbi Metal Co or generate 0.0% return on investment over 90 days.

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

INSUN Environmental New  vs.  Kbi Metal Co

INSUN Environmental New

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSUN Environmental New 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.

Kbi Metal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kbi Metal Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kbi Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with INSUN Environmental and Kbi Metal

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

The idea behind INSUN Environmental New and Kbi Metal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.