Correlation Between KBSTAR 200TR and KCI

Can any of the company-specific risk be diversified away by investing in both KBSTAR 200TR and KCI 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 KBSTAR 200TR and KCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KBSTAR 200TR and KCI Limited, you can compare the effects of market volatilities on KBSTAR 200TR and KCI 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 KBSTAR 200TR with a short position of KCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBSTAR 200TR and KCI.

Diversification Opportunities for KBSTAR 200TR and KCI

0.68

Correlation Coefficient

KBSTAR 200TR  KCI

Poor diversification

The 3 months correlation between KBSTAR and KCI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KBSTAR 200TR and KCI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI Limited and KBSTAR 200TR 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 KBSTAR 200TR are associated (or correlated) with KCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI Limited has no effect on the direction of KBSTAR 200TR i.e., KBSTAR 200TR and KCI go up and down completely randomly.

Pair Corralation between KBSTAR 200TR and KCI

Assuming the 90 days trading horizon KBSTAR 200TR is expected to generate 0.88 times more return on investment than KCI. However, KBSTAR 200TR is 1.14 times less risky than KCI. It trades about -0.12 of its potential returns per unit of risk. KCI Limited is currently generating about -0.12 per unit of risk. If you would invest  1,976,500  in KBSTAR 200TR on September 3, 2024 and sell it today you would lose (171,000) from holding KBSTAR 200TR or give up 8.65% of portfolio value over 90 days.

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

KBSTAR 200TR  vs.  KCI Limited

KBSTAR 200TR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBSTAR 200TR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

KCI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCI Limited 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 KBSTAR 200TR and KCI

The main advantage of trading using opposite KBSTAR 200TR and KCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBSTAR 200TR position performs unexpectedly, KCI 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 KCI will offset losses from the drop in KCI's long position.

The idea behind KBSTAR 200TR and KCI Limited 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 Stocks Directory module to find actively traded stocks across global markets.