Correlation Between KSEC Intelligent and ISoftStone Information

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

By analyzing existing cross correlation between KSEC Intelligent Technology and iSoftStone Information Technology, you can compare the effects of market volatilities on KSEC Intelligent and ISoftStone Information 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 KSEC Intelligent with a short position of ISoftStone Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSEC Intelligent and ISoftStone Information.

Diversification Opportunities for KSEC Intelligent and ISoftStone Information

0.56

Correlation Coefficient

KSEC Intelligent  ISoftStone Information

Very weak diversification

The 3 months correlation between KSEC and ISoftStone is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding KSEC Intelligent Technology and iSoftStone Information Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSoftStone Information and KSEC Intelligent 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 KSEC Intelligent Technology are associated (or correlated) with ISoftStone Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSoftStone Information has no effect on the direction of KSEC Intelligent i.e., KSEC Intelligent and ISoftStone Information go up and down completely randomly.

Pair Corralation between KSEC Intelligent and ISoftStone Information

Assuming the 90 days trading horizon KSEC Intelligent Technology is expected to under-perform the ISoftStone Information. But the stock apears to be less risky and, when comparing its historical volatility, KSEC Intelligent Technology is 1.3 times less risky than ISoftStone Information. The stock trades about -0.23 of its potential returns per unit of risk. The iSoftStone Information Technology is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  6,559  in iSoftStone Information Technology on October 6, 2024 and sell it today you would lose (1,355) from holding iSoftStone Information Technology or give up 20.66% of portfolio value over 90 days.

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

KSEC Intelligent Technology  vs.  iSoftStone Information Technol

KSEC Intelligent Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KSEC Intelligent Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

iSoftStone Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iSoftStone Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KSEC Intelligent and ISoftStone Information

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

The idea behind KSEC Intelligent Technology and iSoftStone Information Technology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.