Correlation Between Advanced Ceramic and Kworld Computer

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

By analyzing existing cross correlation between Advanced Ceramic X and Kworld Computer Co, you can compare the effects of market volatilities on Advanced Ceramic and Kworld Computer 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 Advanced Ceramic with a short position of Kworld Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Ceramic and Kworld Computer.

Diversification Opportunities for Advanced Ceramic and Kworld Computer

-0.1

Correlation Coefficient

Advanced Ceramic  Kworld Computer

Good diversification

The 3 months correlation between Advanced and Kworld is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Kworld Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kworld Computer and Advanced Ceramic 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 Advanced Ceramic X are associated (or correlated) with Kworld Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kworld Computer has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and Kworld Computer go up and down completely randomly.

Pair Corralation between Advanced Ceramic and Kworld Computer

Assuming the 90 days trading horizon Advanced Ceramic X is expected to generate 1.19 times more return on investment than Kworld Computer. However, Advanced Ceramic is 1.19 times more volatile than Kworld Computer Co. It trades about 0.03 of its potential returns per unit of risk. Kworld Computer Co is currently generating about -0.06 per unit of risk. If you would invest  17,600  in Advanced Ceramic X on September 15, 2024 and sell it today you would earn a total of  600.00  from holding Advanced Ceramic X or generate 3.41% return on investment over 90 days.

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

Advanced Ceramic X  vs.  Kworld Computer Co

Advanced Ceramic X

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advanced Ceramic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kworld Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kworld Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Advanced Ceramic and Kworld Computer

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

The idea behind Advanced Ceramic X and Kworld Computer Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.