Correlation Between HuMC and KBSTAR 200TR

Can any of the company-specific risk be diversified away by investing in both HuMC and KBSTAR 200TR 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 HuMC and KBSTAR 200TR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HuMC Co and KBSTAR 200TR, you can compare the effects of market volatilities on HuMC and KBSTAR 200TR 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 HuMC with a short position of KBSTAR 200TR. Check out your portfolio center. Please also check ongoing floating volatility patterns of HuMC and KBSTAR 200TR.

Diversification Opportunities for HuMC and KBSTAR 200TR

0.24

Correlation Coefficient

HuMC  KBSTAR 200TR

Modest diversification

The 3 months correlation between HuMC and KBSTAR is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding HuMC Co and KBSTAR 200TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR 200TR and HuMC 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 HuMC Co are associated (or correlated) with KBSTAR 200TR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR 200TR has no effect on the direction of HuMC i.e., HuMC and KBSTAR 200TR go up and down completely randomly.

Pair Corralation between HuMC and KBSTAR 200TR

Assuming the 90 days trading horizon HuMC Co is expected to under-perform the KBSTAR 200TR. In addition to that, HuMC is 1.23 times more volatile than KBSTAR 200TR. It trades about -0.03 of its total potential returns per unit of risk. KBSTAR 200TR is currently generating about 0.13 per unit of volatility. If you would invest  1,801,000  in KBSTAR 200TR on November 29, 2024 and sell it today you would earn a total of  140,500  from holding KBSTAR 200TR or generate 7.8% return on investment over 90 days.

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

HuMC Co  vs.  KBSTAR 200TR

HuMC

Risk-Adjusted Performance

Very Weak

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

KBSTAR 200TR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR 200TR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR 200TR may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with HuMC and KBSTAR 200TR

The main advantage of trading using opposite HuMC and KBSTAR 200TR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HuMC position performs unexpectedly, KBSTAR 200TR 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 200TR will offset losses from the drop in KBSTAR 200TR's long position.

The idea behind HuMC Co and KBSTAR 200TR 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..