Correlation Between DOD Biotech and KC Metalsheet

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

By analyzing existing cross correlation between DOD Biotech Public and KC Metalsheet Public, you can compare the effects of market volatilities on DOD Biotech and KC Metalsheet 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 DOD Biotech with a short position of KC Metalsheet. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOD Biotech and KC Metalsheet.

Diversification Opportunities for DOD Biotech and KC Metalsheet

0.96

Correlation Coefficient

DOD Biotech  KC Metalsheet

Almost no diversification

The 3 months correlation between DOD and KCM is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding DOD Biotech Public and KC Metalsheet Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KC Metalsheet Public and DOD Biotech 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 DOD Biotech Public are associated (or correlated) with KC Metalsheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KC Metalsheet Public has no effect on the direction of DOD Biotech i.e., DOD Biotech and KC Metalsheet go up and down completely randomly.

Pair Corralation between DOD Biotech and KC Metalsheet

Assuming the 90 days trading horizon DOD Biotech is expected to generate 1.01 times less return on investment than KC Metalsheet. But when comparing it to its historical volatility, DOD Biotech Public is 1.0 times less risky than KC Metalsheet. It trades about 0.07 of its potential returns per unit of risk. KC Metalsheet Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  31.00  in KC Metalsheet Public on October 13, 2024 and sell it today you would lose (5.00) from holding KC Metalsheet Public or give up 16.13% of portfolio value over 90 days.

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

DOD Biotech Public  vs.  KC Metalsheet Public

DOD Biotech Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOD Biotech Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

KC Metalsheet Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KC Metalsheet Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with DOD Biotech and KC Metalsheet

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

The idea behind DOD Biotech Public and KC Metalsheet Public 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.