Correlation Between Kings Town and Sakura Development

Can any of the company-specific risk be diversified away by investing in both Kings Town and Sakura Development 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 Kings Town and Sakura Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kings Town Construction and Sakura Development Co, you can compare the effects of market volatilities on Kings Town and Sakura Development 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 Kings Town with a short position of Sakura Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kings Town and Sakura Development.

Diversification Opportunities for Kings Town and Sakura Development

0.11

Correlation Coefficient

Kings Town  Sakura Development

Average diversification

The 3 months correlation between Kings and Sakura is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kings Town Construction and Sakura Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sakura Development and Kings Town 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 Kings Town Construction are associated (or correlated) with Sakura Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sakura Development has no effect on the direction of Kings Town i.e., Kings Town and Sakura Development go up and down completely randomly.

Pair Corralation between Kings Town and Sakura Development

Assuming the 90 days trading horizon Kings Town Construction is expected to under-perform the Sakura Development. But the stock apears to be less risky and, when comparing its historical volatility, Kings Town Construction is 1.13 times less risky than Sakura Development. The stock trades about -0.29 of its potential returns per unit of risk. The Sakura Development Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,090  in Sakura Development Co on September 20, 2024 and sell it today you would lose (60.00) from holding Sakura Development Co or give up 1.18% of portfolio value over 90 days.

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

Kings Town Construction  vs.  Sakura Development Co

Kings Town Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kings Town Construction 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sakura Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sakura Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sakura Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kings Town and Sakura Development

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

The idea behind Kings Town Construction and Sakura Development 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.