Correlation Between KAGA EL and PC Connection

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

By analyzing existing cross correlation between KAGA EL LTD and PC Connection, you can compare the effects of market volatilities on KAGA EL and PC Connection 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 KAGA EL with a short position of PC Connection. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAGA EL and PC Connection.

Diversification Opportunities for KAGA EL and PC Connection

0.39

Correlation Coefficient

KAGA EL  PC Connection

Weak diversification

The 3 months correlation between KAGA and PCC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding KAGA EL LTD and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection and KAGA EL 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 KAGA EL LTD are associated (or correlated) with PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of KAGA EL i.e., KAGA EL and PC Connection go up and down completely randomly.

Pair Corralation between KAGA EL and PC Connection

Assuming the 90 days horizon KAGA EL is expected to generate 1.0 times less return on investment than PC Connection. But when comparing it to its historical volatility, KAGA EL LTD is 1.36 times less risky than PC Connection. It trades about 0.15 of its potential returns per unit of risk. PC Connection is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,450  in PC Connection on September 22, 2024 and sell it today you would earn a total of  300.00  from holding PC Connection or generate 4.65% return on investment over 90 days.

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

KAGA EL LTD  vs.  PC Connection

KAGA EL LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAGA EL LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAGA EL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PC Connection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PC Connection is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KAGA EL and PC Connection

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

The idea behind KAGA EL LTD and PC Connection 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.