Correlation Between K Laser and China Steel

Can any of the company-specific risk be diversified away by investing in both K Laser and China Steel 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 K Laser and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for K Laser and China Steel

0.91

Correlation Coefficient

K Laser  China Steel

Almost no diversification

The 3 months correlation between 2461 and China is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding K Laser Technology and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and K Laser 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 K Laser Technology are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of K Laser i.e., K Laser and China Steel go up and down completely randomly.

Pair Corralation between K Laser and China Steel

Assuming the 90 days trading horizon K Laser Technology is expected to generate 1.33 times more return on investment than China Steel. However, K Laser is 1.33 times more volatile than China Steel Corp. It trades about -0.22 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.62 per unit of risk. If you would invest  2,090  in K Laser Technology on October 4, 2024 and sell it today you would lose (90.00) from holding K Laser Technology or give up 4.31% of portfolio value over 90 days.

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

K Laser Technology  vs.  China Steel Corp

K Laser Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K Laser Technology 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.

China Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with K Laser and China Steel

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

The idea behind K Laser Technology and China Steel Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.