Correlation Between Wave Electronics and Kbi Metal

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

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

Diversification Opportunities for Wave Electronics and Kbi Metal

-0.29

Correlation Coefficient

Wave Electronics  Kbi Metal

Very good diversification

The 3 months correlation between Wave and Kbi is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and Wave Electronics 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 Wave Electronics Co 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 Wave Electronics i.e., Wave Electronics and Kbi Metal go up and down completely randomly.

Pair Corralation between Wave Electronics and Kbi Metal

Assuming the 90 days trading horizon Wave Electronics is expected to generate 1.45 times less return on investment than Kbi Metal. In addition to that, Wave Electronics is 1.01 times more volatile than Kbi Metal Co. It trades about 0.05 of its total potential returns per unit of risk. Kbi Metal Co is currently generating about 0.08 per unit of volatility. If you would invest  193,300  in Kbi Metal Co on December 27, 2024 and sell it today you would earn a total of  23,200  from holding Kbi Metal Co or generate 12.0% return on investment over 90 days.

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

Wave Electronics Co  vs.  Kbi Metal Co

Wave Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wave Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kbi Metal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kbi Metal Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kbi Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wave Electronics and Kbi Metal

The main advantage of trading using opposite Wave Electronics and Kbi Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wave Electronics 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 Wave Electronics Co 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.