Correlation Between K Way and Hi Sharp

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

By analyzing existing cross correlation between K Way Information and Hi Sharp Electronics, you can compare the effects of market volatilities on K Way and Hi Sharp 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 K Way with a short position of Hi Sharp. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Way and Hi Sharp.

Diversification Opportunities for K Way and Hi Sharp

0.5

Correlation Coefficient

K Way  Hi Sharp

Very weak diversification

The 3 months correlation between 5201 and 3128 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding K Way Information and Hi Sharp Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Sharp Electronics and K Way 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 K Way Information are associated (or correlated) with Hi Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Sharp Electronics has no effect on the direction of K Way i.e., K Way and Hi Sharp go up and down completely randomly.

Pair Corralation between K Way and Hi Sharp

Assuming the 90 days trading horizon K Way Information is expected to generate 0.71 times more return on investment than Hi Sharp. However, K Way Information is 1.4 times less risky than Hi Sharp. It trades about 0.17 of its potential returns per unit of risk. Hi Sharp Electronics is currently generating about -0.02 per unit of risk. If you would invest  2,840  in K Way Information on December 29, 2024 and sell it today you would earn a total of  695.00  from holding K Way Information or generate 24.47% return on investment over 90 days.

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

K Way Information  vs.  Hi Sharp Electronics

K Way Information

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

Hi Sharp Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Sharp Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hi Sharp 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 K Way and Hi Sharp

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

The idea behind K Way Information and Hi Sharp Electronics 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.