Correlation Between EM and QKC

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

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

Diversification Opportunities for EM and QKC

0.0

Correlation Coefficient

EM  QKC

Pay attention - limited upside

The 3 months correlation between EM and QKC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EM and QKC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QKC and EM 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 EM are associated (or correlated) with QKC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QKC has no effect on the direction of EM i.e., EM and QKC go up and down completely randomly.

Pair Corralation between EM and QKC

Assuming the 90 days horizon EM is expected to under-perform the QKC. But the crypto coin apears to be less risky and, when comparing its historical volatility, EM is 1.48 times less risky than QKC. The crypto coin trades about -0.08 of its potential returns per unit of risk. The QKC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.14  in QKC on September 1, 2024 and sell it today you would earn a total of  0.11  from holding QKC or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EM  vs.  QKC

EM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

QKC

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with EM and QKC

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

The idea behind EM and QKC 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 Stocks Directory module to find actively traded stocks across global markets.