Correlation Between INSUN Environmental and Kmw

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

Diversification Opportunities for INSUN Environmental and Kmw

-0.43

Correlation Coefficient

INSUN Environmental  Kmw

Very good diversification

The 3 months correlation between INSUN and Kmw is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding INSUN Environmental New and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc 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 Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of INSUN Environmental i.e., INSUN Environmental and Kmw go up and down completely randomly.

Pair Corralation between INSUN Environmental and Kmw

Assuming the 90 days trading horizon INSUN Environmental New is expected to under-perform the Kmw. But the stock apears to be less risky and, when comparing its historical volatility, INSUN Environmental New is 1.48 times less risky than Kmw. The stock trades about -0.05 of its potential returns per unit of risk. The Kmw Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  730,000  in Kmw Inc on October 1, 2024 and sell it today you would earn a total of  159,000  from holding Kmw Inc or generate 21.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

INSUN Environmental New  vs.  Kmw Inc

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

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.

Kmw Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kmw Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kmw sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INSUN Environmental and Kmw

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

The idea behind INSUN Environmental New and Kmw Inc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.