Correlation Between SGA Solutions and KMH Hitech

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

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

Diversification Opportunities for SGA Solutions and KMH Hitech

0.66

Correlation Coefficient

SGA Solutions  KMH Hitech

Poor diversification

The 3 months correlation between SGA and KMH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SGA Solutions CoLtd and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and SGA Solutions 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 SGA Solutions CoLtd 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 SGA Solutions i.e., SGA Solutions and KMH Hitech go up and down completely randomly.

Pair Corralation between SGA Solutions and KMH Hitech

Assuming the 90 days trading horizon SGA Solutions CoLtd is expected to generate 1.34 times more return on investment than KMH Hitech. However, SGA Solutions is 1.34 times more volatile than KMH Hitech Co. It trades about 0.48 of its potential returns per unit of risk. KMH Hitech Co is currently generating about 0.62 per unit of risk. If you would invest  40,952  in SGA Solutions CoLtd on October 11, 2024 and sell it today you would earn a total of  7,948  from holding SGA Solutions CoLtd or generate 19.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

SGA Solutions CoLtd  vs.  KMH Hitech Co

SGA Solutions CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGA Solutions CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SGA Solutions 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

0 of 100

Very Weak

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

Pair Trading with SGA Solutions and KMH Hitech

The main advantage of trading using opposite SGA Solutions and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGA Solutions 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 SGA Solutions CoLtd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.