Correlation Between Kenmec Mechanical and Globaltek Fabrication

Can any of the company-specific risk be diversified away by investing in both Kenmec Mechanical and Globaltek Fabrication 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 Globaltek Fabrication 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 Globaltek Fabrication Co, you can compare the effects of market volatilities on Kenmec Mechanical and Globaltek Fabrication 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 Globaltek Fabrication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenmec Mechanical and Globaltek Fabrication.

Diversification Opportunities for Kenmec Mechanical and Globaltek Fabrication

0.89

Correlation Coefficient

Kenmec Mechanical  Globaltek Fabrication

Very poor diversification

The 3 months correlation between Kenmec and Globaltek is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kenmec Mechanical Engineering and Globaltek Fabrication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globaltek Fabrication 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 Globaltek Fabrication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globaltek Fabrication has no effect on the direction of Kenmec Mechanical i.e., Kenmec Mechanical and Globaltek Fabrication go up and down completely randomly.

Pair Corralation between Kenmec Mechanical and Globaltek Fabrication

Assuming the 90 days trading horizon Kenmec Mechanical Engineering is expected to generate 0.8 times more return on investment than Globaltek Fabrication. However, Kenmec Mechanical Engineering is 1.25 times less risky than Globaltek Fabrication. It trades about -0.04 of its potential returns per unit of risk. Globaltek Fabrication Co is currently generating about -0.12 per unit of risk. If you would invest  9,040  in Kenmec Mechanical Engineering on September 16, 2024 and sell it today you would lose (580.00) from holding Kenmec Mechanical Engineering or give up 6.42% of portfolio value over 90 days.

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

Kenmec Mechanical Engineering  vs.  Globaltek Fabrication Co

Kenmec Mechanical

Risk-Adjusted Performance

0 of 100

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 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.

Globaltek Fabrication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globaltek Fabrication Co 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Kenmec Mechanical and Globaltek Fabrication

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

The idea behind Kenmec Mechanical Engineering and Globaltek Fabrication Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.