Correlation Between Kenmec Mechanical and Golden Friends

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

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

Diversification Opportunities for Kenmec Mechanical and Golden Friends

0.18

Correlation Coefficient

Kenmec Mechanical  Golden Friends

Average diversification

The 3 months correlation between Kenmec and Golden is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kenmec Mechanical Engineering and Golden Friends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Friends and Kenmec Mechanical 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 Kenmec Mechanical Engineering are associated (or correlated) with Golden Friends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Friends has no effect on the direction of Kenmec Mechanical i.e., Kenmec Mechanical and Golden Friends go up and down completely randomly.

Pair Corralation between Kenmec Mechanical and Golden Friends

Assuming the 90 days trading horizon Kenmec Mechanical is expected to generate 2.7 times less return on investment than Golden Friends. In addition to that, Kenmec Mechanical is 2.79 times more volatile than Golden Friends. It trades about 0.02 of its total potential returns per unit of risk. Golden Friends is currently generating about 0.17 per unit of volatility. If you would invest  10,250  in Golden Friends on December 4, 2024 and sell it today you would earn a total of  750.00  from holding Golden Friends or generate 7.32% return on investment over 90 days.

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

Kenmec Mechanical Engineering  vs.  Golden Friends

Kenmec Mechanical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kenmec Mechanical Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kenmec Mechanical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Golden Friends

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Friends are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Golden Friends may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kenmec Mechanical and Golden Friends

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

The idea behind Kenmec Mechanical Engineering and Golden Friends 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..