Correlation Between BCAP SET100 and KTAM Gold

Can any of the company-specific risk be diversified away by investing in both BCAP SET100 and KTAM Gold 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 BCAP SET100 and KTAM Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BCAP SET100 and KTAM Gold ETF, you can compare the effects of market volatilities on BCAP SET100 and KTAM Gold 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 BCAP SET100 with a short position of KTAM Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCAP SET100 and KTAM Gold.

Diversification Opportunities for BCAP SET100 and KTAM Gold

0.2

Correlation Coefficient

BCAP SET100  KTAM Gold

Modest diversification

The 3 months correlation between BCAP and KTAM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BCAP SET100 and KTAM Gold ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTAM Gold ETF and BCAP SET100 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 BCAP SET100 are associated (or correlated) with KTAM Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTAM Gold ETF has no effect on the direction of BCAP SET100 i.e., BCAP SET100 and KTAM Gold go up and down completely randomly.

Pair Corralation between BCAP SET100 and KTAM Gold

Assuming the 90 days trading horizon BCAP SET100 is expected to under-perform the KTAM Gold. In addition to that, BCAP SET100 is 1.01 times more volatile than KTAM Gold ETF. It trades about -0.33 of its total potential returns per unit of risk. KTAM Gold ETF is currently generating about -0.09 per unit of volatility. If you would invest  367.00  in KTAM Gold ETF on September 22, 2024 and sell it today you would lose (5.00) from holding KTAM Gold ETF or give up 1.36% of portfolio value over 90 days.

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

BCAP SET100  vs.  KTAM Gold ETF

BCAP SET100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCAP SET100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BCAP SET100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KTAM Gold ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KTAM Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, KTAM Gold is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BCAP SET100 and KTAM Gold

The main advantage of trading using opposite BCAP SET100 and KTAM Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCAP SET100 position performs unexpectedly, KTAM Gold 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 KTAM Gold will offset losses from the drop in KTAM Gold's long position.

The idea behind BCAP SET100 and KTAM Gold ETF 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.