Correlation Between KBSTAR HealthCare and KBSTAR Short

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

By analyzing existing cross correlation between KBSTAR HealthCare Fixed and KBSTAR Short Term IG, you can compare the effects of market volatilities on KBSTAR HealthCare and KBSTAR Short 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 KBSTAR HealthCare with a short position of KBSTAR Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBSTAR HealthCare and KBSTAR Short.

Diversification Opportunities for KBSTAR HealthCare and KBSTAR Short

-0.66

Correlation Coefficient

KBSTAR HealthCare  KBSTAR Short

Excellent diversification

The 3 months correlation between KBSTAR and KBSTAR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding KBSTAR HealthCare Fixed and KBSTAR Short Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR Short Term and KBSTAR HealthCare 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 KBSTAR HealthCare Fixed are associated (or correlated) with KBSTAR Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR Short Term has no effect on the direction of KBSTAR HealthCare i.e., KBSTAR HealthCare and KBSTAR Short go up and down completely randomly.

Pair Corralation between KBSTAR HealthCare and KBSTAR Short

Assuming the 90 days trading horizon KBSTAR HealthCare Fixed is expected to under-perform the KBSTAR Short. In addition to that, KBSTAR HealthCare is 1.51 times more volatile than KBSTAR Short Term IG. It trades about -0.03 of its total potential returns per unit of risk. KBSTAR Short Term IG is currently generating about 0.27 per unit of volatility. If you would invest  1,129,000  in KBSTAR Short Term IG on October 10, 2024 and sell it today you would earn a total of  88,000  from holding KBSTAR Short Term IG or generate 7.79% return on investment over 90 days.

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

KBSTAR HealthCare Fixed  vs.  KBSTAR Short Term IG

KBSTAR HealthCare Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

KBSTAR Short Term

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR Short Term IG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR Short may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KBSTAR HealthCare and KBSTAR Short

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

The idea behind KBSTAR HealthCare Fixed and KBSTAR Short Term IG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.