Correlation Between United States and K3 Business

Can any of the company-specific risk be diversified away by investing in both United States and K3 Business 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 United States and K3 Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and K3 Business Technology, you can compare the effects of market volatilities on United States and K3 Business 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 United States with a short position of K3 Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and K3 Business.

Diversification Opportunities for United States and K3 Business

0.49

Correlation Coefficient

United States  K3 Business

Very weak diversification

The 3 months correlation between United and KBT is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and K3 Business Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K3 Business Technology and United States 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 United States Steel are associated (or correlated) with K3 Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K3 Business Technology has no effect on the direction of United States i.e., United States and K3 Business go up and down completely randomly.

Pair Corralation between United States and K3 Business

Assuming the 90 days trading horizon United States Steel is expected to generate 0.65 times more return on investment than K3 Business. However, United States Steel is 1.53 times less risky than K3 Business. It trades about 0.2 of its potential returns per unit of risk. K3 Business Technology is currently generating about 0.09 per unit of risk. If you would invest  3,130  in United States Steel on December 30, 2024 and sell it today you would earn a total of  1,138  from holding United States Steel or generate 36.36% return on investment over 90 days.

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

United States Steel  vs.  K3 Business Technology

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

K3 Business Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K3 Business Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, K3 Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and K3 Business

The main advantage of trading using opposite United States and K3 Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, K3 Business 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 K3 Business will offset losses from the drop in K3 Business' long position.

The idea behind United States Steel and K3 Business Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.