Correlation Between Fine Besteel and Kbi Metal

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

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

Diversification Opportunities for Fine Besteel and Kbi Metal

-0.64

Correlation Coefficient

Fine Besteel  Kbi Metal

Excellent diversification

The 3 months correlation between Fine and Kbi is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel 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 Fine Besteel 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 Fine Besteel 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 Fine Besteel i.e., Fine Besteel and Kbi Metal go up and down completely randomly.

Pair Corralation between Fine Besteel and Kbi Metal

Assuming the 90 days trading horizon Fine Besteel Co is expected to under-perform the Kbi Metal. But the stock apears to be less risky and, when comparing its historical volatility, Fine Besteel Co is 1.68 times less risky than Kbi Metal. The stock trades about -0.04 of its potential returns per unit of risk. The Kbi Metal Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  134,000  in Kbi Metal Co on October 10, 2024 and sell it today you would earn a total of  78,000  from holding Kbi Metal Co or generate 58.21% return on investment over 90 days.

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

Fine Besteel Co  vs.  Kbi Metal Co

Fine Besteel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fine Besteel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fine Besteel and Kbi Metal

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

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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.