Correlation Between EMedia Holdings and Kap Industrial

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

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

Diversification Opportunities for EMedia Holdings and Kap Industrial

0.5

Correlation Coefficient

EMedia Holdings  Kap Industrial

Very weak diversification

The 3 months correlation between EMedia and Kap is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding eMedia Holdings Limited and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and EMedia Holdings 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 eMedia Holdings Limited are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of EMedia Holdings i.e., EMedia Holdings and Kap Industrial go up and down completely randomly.

Pair Corralation between EMedia Holdings and Kap Industrial

Assuming the 90 days trading horizon eMedia Holdings Limited is expected to under-perform the Kap Industrial. But the stock apears to be less risky and, when comparing its historical volatility, eMedia Holdings Limited is 1.11 times less risky than Kap Industrial. The stock trades about -0.07 of its potential returns per unit of risk. The Kap Industrial Holdings is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  30,000  in Kap Industrial Holdings on December 20, 2024 and sell it today you would lose (3,500) from holding Kap Industrial Holdings or give up 11.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

eMedia Holdings Limited  vs.  Kap Industrial Holdings

eMedia Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days eMedia Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EMedia Holdings and Kap Industrial

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

The idea behind eMedia Holdings Limited and Kap Industrial Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.