Correlation Between EV Advanced and KMH Hitech

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

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

Diversification Opportunities for EV Advanced and KMH Hitech

0.37

Correlation Coefficient

EV Advanced  KMH Hitech

Weak diversification

The 3 months correlation between 131400 and KMH is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and EV Advanced 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 EV Advanced Material are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of EV Advanced i.e., EV Advanced and KMH Hitech go up and down completely randomly.

Pair Corralation between EV Advanced and KMH Hitech

Assuming the 90 days trading horizon EV Advanced Material is expected to under-perform the KMH Hitech. In addition to that, EV Advanced is 1.38 times more volatile than KMH Hitech Co. It trades about -0.02 of its total potential returns per unit of risk. KMH Hitech Co is currently generating about 0.09 per unit of volatility. If you would invest  90,100  in KMH Hitech Co on December 23, 2024 and sell it today you would earn a total of  7,200  from holding KMH Hitech Co or generate 7.99% return on investment over 90 days.

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

EV Advanced Material  vs.  KMH Hitech Co

EV Advanced Material

Risk-Adjusted Performance

Very Weak

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

KMH Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KMH Hitech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EV Advanced and KMH Hitech

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

The idea behind EV Advanced Material and KMH Hitech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.