Correlation Between Rich Development and Kenmec Mechanical

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

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

Diversification Opportunities for Rich Development and Kenmec Mechanical

-0.41

Correlation Coefficient

Rich Development  Kenmec Mechanical

Very good diversification

The 3 months correlation between Rich and Kenmec is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rich Development Co and Kenmec Mechanical Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenmec Mechanical and Rich Development 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 Rich Development Co are associated (or correlated) with Kenmec Mechanical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenmec Mechanical has no effect on the direction of Rich Development i.e., Rich Development and Kenmec Mechanical go up and down completely randomly.

Pair Corralation between Rich Development and Kenmec Mechanical

Assuming the 90 days trading horizon Rich Development Co is expected to generate 0.45 times more return on investment than Kenmec Mechanical. However, Rich Development Co is 2.21 times less risky than Kenmec Mechanical. It trades about -0.01 of its potential returns per unit of risk. Kenmec Mechanical Engineering is currently generating about -0.11 per unit of risk. If you would invest  983.00  in Rich Development Co on December 30, 2024 and sell it today you would lose (12.00) from holding Rich Development Co or give up 1.22% of portfolio value over 90 days.

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

Rich Development Co  vs.  Kenmec Mechanical Engineering

Rich Development

Risk-Adjusted Performance

Very Weak

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

Kenmec Mechanical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kenmec Mechanical Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Rich Development and Kenmec Mechanical

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

The idea behind Rich Development Co and Kenmec Mechanical Engineering 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.