Correlation Between Air Link and KOT Addu

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

By analyzing existing cross correlation between Air Link Communication and KOT Addu Power, you can compare the effects of market volatilities on Air Link and KOT Addu 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 Air Link with a short position of KOT Addu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Link and KOT Addu.

Diversification Opportunities for Air Link and KOT Addu

0.83

Correlation Coefficient

Air Link  KOT Addu

Very poor diversification

The 3 months correlation between Air and KOT is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication and KOT Addu Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOT Addu Power and Air Link 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 Air Link Communication are associated (or correlated) with KOT Addu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOT Addu Power has no effect on the direction of Air Link i.e., Air Link and KOT Addu go up and down completely randomly.

Pair Corralation between Air Link and KOT Addu

Assuming the 90 days trading horizon Air Link Communication is expected to generate 1.81 times more return on investment than KOT Addu. However, Air Link is 1.81 times more volatile than KOT Addu Power. It trades about 0.17 of its potential returns per unit of risk. KOT Addu Power is currently generating about 0.28 per unit of risk. If you would invest  13,686  in Air Link Communication on October 24, 2024 and sell it today you would earn a total of  6,111  from holding Air Link Communication or generate 44.65% return on investment over 90 days.

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

Air Link Communication  vs.  KOT Addu Power

Air Link Communication

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Link Communication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Air Link disclosed solid returns over the last few months and may actually be approaching a breakup point.

KOT Addu Power

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOT Addu Power are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, KOT Addu disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Link and KOT Addu

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

The idea behind Air Link Communication and KOT Addu Power 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 CEOs Directory module to screen CEOs from public companies around the world.