Correlation Between Kafrit and Polyram Plastic

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

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

Diversification Opportunities for Kafrit and Polyram Plastic

-0.16

Correlation Coefficient

Kafrit  Polyram Plastic

Good diversification

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

Pair Corralation between Kafrit and Polyram Plastic

Assuming the 90 days trading horizon Kafrit is expected to generate 1.16 times more return on investment than Polyram Plastic. However, Kafrit is 1.16 times more volatile than Polyram Plastic Industries. It trades about 0.09 of its potential returns per unit of risk. Polyram Plastic Industries is currently generating about 0.05 per unit of risk. If you would invest  150,596  in Kafrit on November 20, 2024 and sell it today you would earn a total of  150,604  from holding Kafrit or generate 100.01% return on investment over 90 days.

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

Kafrit  vs.  Polyram Plastic Industries

Kafrit

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kafrit are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kafrit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polyram Plastic Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polyram Plastic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Polyram Plastic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kafrit and Polyram Plastic

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

The idea behind Kafrit and Polyram Plastic Industries 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.