Correlation Between Ability Enterprise and Kinpo Electronics

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

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

Diversification Opportunities for Ability Enterprise and Kinpo Electronics

0.12

Correlation Coefficient

Ability Enterprise  Kinpo Electronics

Average diversification

The 3 months correlation between Ability and Kinpo is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ability Enterprise Co and Kinpo Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinpo Electronics and Ability Enterprise 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 Ability Enterprise Co are associated (or correlated) with Kinpo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinpo Electronics has no effect on the direction of Ability Enterprise i.e., Ability Enterprise and Kinpo Electronics go up and down completely randomly.

Pair Corralation between Ability Enterprise and Kinpo Electronics

Assuming the 90 days trading horizon Ability Enterprise Co is expected to generate 1.81 times more return on investment than Kinpo Electronics. However, Ability Enterprise is 1.81 times more volatile than Kinpo Electronics. It trades about -0.06 of its potential returns per unit of risk. Kinpo Electronics is currently generating about -0.11 per unit of risk. If you would invest  6,420  in Ability Enterprise Co on December 23, 2024 and sell it today you would lose (760.00) from holding Ability Enterprise Co or give up 11.84% of portfolio value over 90 days.

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

Ability Enterprise Co  vs.  Kinpo Electronics

Ability Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ability Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Kinpo Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinpo Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ability Enterprise and Kinpo Electronics

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

The idea behind Ability Enterprise Co and Kinpo Electronics 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..