Correlation Between DMCC SPECIALITY and KEC International

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

By analyzing existing cross correlation between DMCC SPECIALITY CHEMICALS and KEC International Limited, you can compare the effects of market volatilities on DMCC SPECIALITY and KEC International 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 DMCC SPECIALITY with a short position of KEC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMCC SPECIALITY and KEC International.

Diversification Opportunities for DMCC SPECIALITY and KEC International

0.89

Correlation Coefficient

DMCC SPECIALITY  KEC International

Very poor diversification

The 3 months correlation between DMCC and KEC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DMCC SPECIALITY CHEMICALS and KEC International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEC International and DMCC SPECIALITY 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 DMCC SPECIALITY CHEMICALS are associated (or correlated) with KEC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEC International has no effect on the direction of DMCC SPECIALITY i.e., DMCC SPECIALITY and KEC International go up and down completely randomly.

Pair Corralation between DMCC SPECIALITY and KEC International

Assuming the 90 days trading horizon DMCC SPECIALITY is expected to generate 2.77 times less return on investment than KEC International. In addition to that, DMCC SPECIALITY is 1.19 times more volatile than KEC International Limited. It trades about 0.03 of its total potential returns per unit of risk. KEC International Limited is currently generating about 0.09 per unit of volatility. If you would invest  48,100  in KEC International Limited on October 4, 2024 and sell it today you would earn a total of  71,780  from holding KEC International Limited or generate 149.23% return on investment over 90 days.

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

DMCC SPECIALITY CHEMICALS  vs.  KEC International Limited

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DMCC SPECIALITY unveiled solid returns over the last few months and may actually be approaching a breakup point.

KEC International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEC International Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, KEC International exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DMCC SPECIALITY and KEC International

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

The idea behind DMCC SPECIALITY CHEMICALS and KEC International Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.