Correlation Between Sports Gear and Kingstate Electronics

Can any of the company-specific risk be diversified away by investing in both Sports Gear and Kingstate Electronics 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 Sports Gear and Kingstate Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sports Gear Co and Kingstate Electronics, you can compare the effects of market volatilities on Sports Gear and Kingstate Electronics 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 Sports Gear with a short position of Kingstate Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Kingstate Electronics.

Diversification Opportunities for Sports Gear and Kingstate Electronics

-0.61

Correlation Coefficient

Sports Gear  Kingstate Electronics

Excellent diversification

The 3 months correlation between Sports and Kingstate is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics and Sports Gear 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 Sports Gear Co are associated (or correlated) with Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Sports Gear i.e., Sports Gear and Kingstate Electronics go up and down completely randomly.

Pair Corralation between Sports Gear and Kingstate Electronics

Assuming the 90 days trading horizon Sports Gear Co is expected to under-perform the Kingstate Electronics. In addition to that, Sports Gear is 2.38 times more volatile than Kingstate Electronics. It trades about -0.13 of its total potential returns per unit of risk. Kingstate Electronics is currently generating about -0.1 per unit of volatility. If you would invest  4,465  in Kingstate Electronics on October 7, 2024 and sell it today you would lose (215.00) from holding Kingstate Electronics or give up 4.82% of portfolio value over 90 days.

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

Sports Gear Co  vs.  Kingstate Electronics

Sports Gear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

Kingstate Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingstate Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Sports Gear and Kingstate Electronics

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

The idea behind Sports Gear Co and Kingstate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.