Correlation Between KNH Enterprise and TCI

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

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

Diversification Opportunities for KNH Enterprise and TCI

-0.37

Correlation Coefficient

KNH Enterprise  TCI

Very good diversification

The 3 months correlation between KNH and TCI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding KNH Enterprise Co and TCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCI Co and KNH Enterprise 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 KNH Enterprise Co are associated (or correlated) with TCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCI Co has no effect on the direction of KNH Enterprise i.e., KNH Enterprise and TCI go up and down completely randomly.

Pair Corralation between KNH Enterprise and TCI

Assuming the 90 days trading horizon KNH Enterprise Co is expected to under-perform the TCI. In addition to that, KNH Enterprise is 1.16 times more volatile than TCI Co. It trades about -0.03 of its total potential returns per unit of risk. TCI Co is currently generating about 0.19 per unit of volatility. If you would invest  12,300  in TCI Co on December 28, 2024 and sell it today you would earn a total of  3,200  from holding TCI Co or generate 26.02% return on investment over 90 days.

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

KNH Enterprise Co  vs.  TCI Co

KNH Enterprise

Risk-Adjusted Performance

Very Weak

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

TCI Co

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TCI Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNH Enterprise and TCI

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

The idea behind KNH Enterprise Co and TCI 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.