Correlation Between Hurum and KMH Hitech

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

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

Diversification Opportunities for Hurum and KMH Hitech

0.6

Correlation Coefficient

Hurum  KMH Hitech

Poor diversification

The 3 months correlation between Hurum and KMH is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hurum Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and Hurum 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 Hurum Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Hurum i.e., Hurum and KMH Hitech go up and down completely randomly.

Pair Corralation between Hurum and KMH Hitech

Assuming the 90 days trading horizon Hurum Co is expected to under-perform the KMH Hitech. In addition to that, Hurum is 1.1 times more volatile than KMH Hitech Co. It trades about -0.02 of its total potential returns per unit of risk. KMH Hitech Co is currently generating about -0.02 per unit of volatility. If you would invest  137,400  in KMH Hitech Co on November 20, 2024 and sell it today you would lose (34,100) from holding KMH Hitech Co or give up 24.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Hurum Co  vs.  KMH Hitech Co

Hurum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hurum Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hurum may actually be approaching a critical reversion point that can send shares even higher in March 2025.

KMH Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KMH Hitech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hurum and KMH Hitech

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

The idea behind Hurum Co and KMH Hitech 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.