Correlation Between Kool2play and Skyline Investment

Can any of the company-specific risk be diversified away by investing in both Kool2play and Skyline Investment 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 Kool2play and Skyline Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kool2play SA and Skyline Investment SA, you can compare the effects of market volatilities on Kool2play and Skyline Investment 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 Kool2play with a short position of Skyline Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kool2play and Skyline Investment.

Diversification Opportunities for Kool2play and Skyline Investment

-0.16

Correlation Coefficient

Kool2play  Skyline Investment

Good diversification

The 3 months correlation between Kool2play and Skyline is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kool2play SA and Skyline Investment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline Investment and Kool2play 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 Kool2play SA are associated (or correlated) with Skyline Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline Investment has no effect on the direction of Kool2play i.e., Kool2play and Skyline Investment go up and down completely randomly.

Pair Corralation between Kool2play and Skyline Investment

Assuming the 90 days trading horizon Kool2play SA is expected to generate 2.95 times more return on investment than Skyline Investment. However, Kool2play is 2.95 times more volatile than Skyline Investment SA. It trades about 0.14 of its potential returns per unit of risk. Skyline Investment SA is currently generating about 0.07 per unit of risk. If you would invest  93.00  in Kool2play SA on November 29, 2024 and sell it today you would earn a total of  32.00  from holding Kool2play SA or generate 34.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.79%
Values	Daily Returns

Kool2play SA  vs.  Skyline Investment SA

Kool2play SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kool2play SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kool2play reported solid returns over the last few months and may actually be approaching a breakup point.

Skyline Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline Investment SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Skyline Investment may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kool2play and Skyline Investment

The main advantage of trading using opposite Kool2play and Skyline Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kool2play position performs unexpectedly, Skyline Investment 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 Skyline Investment will offset losses from the drop in Skyline Investment's long position.

The idea behind Kool2play SA and Skyline Investment SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.