Correlation Between King Strong and Lecron Energy

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

By analyzing existing cross correlation between King Strong New Material and Lecron Energy Saving, you can compare the effects of market volatilities on King Strong and Lecron Energy 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 King Strong with a short position of Lecron Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Lecron Energy.

Diversification Opportunities for King Strong and Lecron Energy

0.77

Correlation Coefficient

King Strong  Lecron Energy

Poor diversification

The 3 months correlation between King and Lecron is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Lecron Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lecron Energy Saving and King Strong 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 King Strong New Material are associated (or correlated) with Lecron Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lecron Energy Saving has no effect on the direction of King Strong i.e., King Strong and Lecron Energy go up and down completely randomly.

Pair Corralation between King Strong and Lecron Energy

Assuming the 90 days trading horizon King Strong New Material is expected to under-perform the Lecron Energy. But the stock apears to be less risky and, when comparing its historical volatility, King Strong New Material is 1.28 times less risky than Lecron Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Lecron Energy Saving is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Lecron Energy Saving on October 25, 2024 and sell it today you would lose (32.00) from holding Lecron Energy Saving or give up 5.27% of portfolio value over 90 days.

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

King Strong New Material  vs.  Lecron Energy Saving

King Strong New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lecron Energy Saving

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with King Strong and Lecron Energy

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

The idea behind King Strong New Material and Lecron Energy Saving 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 Transaction History module to view history of all your transactions and understand their impact on performance.