Correlation Between EnTie Commercial and K Way

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

By analyzing existing cross correlation between EnTie Commercial Bank and K Way Information, you can compare the effects of market volatilities on EnTie Commercial and K Way 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 EnTie Commercial with a short position of K Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnTie Commercial and K Way.

Diversification Opportunities for EnTie Commercial and K Way

-0.23

Correlation Coefficient

EnTie Commercial  K Way

Very good diversification

The 3 months correlation between EnTie and 5201 is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank and K Way Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Way Information and EnTie Commercial 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 EnTie Commercial Bank are associated (or correlated) with K Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Way Information has no effect on the direction of EnTie Commercial i.e., EnTie Commercial and K Way go up and down completely randomly.

Pair Corralation between EnTie Commercial and K Way

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the K Way. But the stock apears to be less risky and, when comparing its historical volatility, EnTie Commercial Bank is 3.1 times less risky than K Way. The stock trades about -0.01 of its potential returns per unit of risk. The K Way Information is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,845  in K Way Information on December 5, 2024 and sell it today you would earn a total of  520.00  from holding K Way Information or generate 18.28% return on investment over 90 days.

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

EnTie Commercial Bank  vs.  K Way Information

EnTie Commercial Bank

Risk-Adjusted Performance

Very Weak

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

K Way Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EnTie Commercial and K Way

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

The idea behind EnTie Commercial Bank and K Way Information 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.