Correlation Between Solution Advanced and KCC Engineering

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

By analyzing existing cross correlation between Solution Advanced Technology and KCC Engineering Construction, you can compare the effects of market volatilities on Solution Advanced and KCC Engineering 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 Solution Advanced with a short position of KCC Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Advanced and KCC Engineering.

Diversification Opportunities for Solution Advanced and KCC Engineering

0.83

Correlation Coefficient

Solution Advanced  KCC Engineering

Very poor diversification

The 3 months correlation between Solution and KCC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and KCC Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCC Engineering Cons and Solution Advanced 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 Solution Advanced Technology are associated (or correlated) with KCC Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCC Engineering Cons has no effect on the direction of Solution Advanced i.e., Solution Advanced and KCC Engineering go up and down completely randomly.

Pair Corralation between Solution Advanced and KCC Engineering

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 1.79 times more return on investment than KCC Engineering. However, Solution Advanced is 1.79 times more volatile than KCC Engineering Construction. It trades about -0.02 of its potential returns per unit of risk. KCC Engineering Construction is currently generating about -0.04 per unit of risk. If you would invest  162,600  in Solution Advanced Technology on September 21, 2024 and sell it today you would lose (17,600) from holding Solution Advanced Technology or give up 10.82% of portfolio value over 90 days.

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

Solution Advanced Technology  vs.  KCC Engineering Construction

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KCC Engineering Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCC Engineering Construction 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 Solution Advanced and KCC Engineering

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

The idea behind Solution Advanced Technology and KCC Engineering Construction 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.