Correlation Between Khgears International and Gold Rain

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

By analyzing existing cross correlation between Khgears International Limited and Gold Rain Enterprises, you can compare the effects of market volatilities on Khgears International and Gold Rain 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 Khgears International with a short position of Gold Rain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khgears International and Gold Rain.

Diversification Opportunities for Khgears International and Gold Rain

0.39

Correlation Coefficient

Khgears International  Gold Rain

Weak diversification

The 3 months correlation between Khgears and Gold is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Khgears International Limited and Gold Rain Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Rain Enterprises and Khgears International 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 Khgears International Limited are associated (or correlated) with Gold Rain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Rain Enterprises has no effect on the direction of Khgears International i.e., Khgears International and Gold Rain go up and down completely randomly.

Pair Corralation between Khgears International and Gold Rain

Assuming the 90 days trading horizon Khgears International Limited is expected to generate 2.12 times more return on investment than Gold Rain. However, Khgears International is 2.12 times more volatile than Gold Rain Enterprises. It trades about 0.42 of its potential returns per unit of risk. Gold Rain Enterprises is currently generating about 0.0 per unit of risk. If you would invest  17,450  in Khgears International Limited on September 25, 2024 and sell it today you would earn a total of  7,900  from holding Khgears International Limited or generate 45.27% return on investment over 90 days.

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

Khgears International Limited  vs.  Gold Rain Enterprises

Khgears International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khgears International Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Khgears International showed solid returns over the last few months and may actually be approaching a breakup point.

Gold Rain Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Rain Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gold Rain is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Khgears International and Gold Rain

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

The idea behind Khgears International Limited and Gold Rain Enterprises 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.