Correlation Between Kukil Metal and PlayD

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

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

Diversification Opportunities for Kukil Metal and PlayD

0.25

Correlation Coefficient

Kukil Metal  PlayD

Modest diversification

The 3 months correlation between Kukil and PlayD is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kukil Metal Co and PlayD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayD and Kukil Metal 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 Kukil Metal Co are associated (or correlated) with PlayD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayD has no effect on the direction of Kukil Metal i.e., Kukil Metal and PlayD go up and down completely randomly.

Pair Corralation between Kukil Metal and PlayD

Assuming the 90 days trading horizon Kukil Metal is expected to generate 1.06 times less return on investment than PlayD. But when comparing it to its historical volatility, Kukil Metal Co is 2.79 times less risky than PlayD. It trades about 0.32 of its potential returns per unit of risk. PlayD Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  591,000  in PlayD Co on October 24, 2024 and sell it today you would earn a total of  40,000  from holding PlayD Co or generate 6.77% return on investment over 90 days.

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

Kukil Metal Co  vs.  PlayD Co

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

PlayD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kukil Metal and PlayD

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

The idea behind Kukil Metal Co and PlayD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.