Correlation Between Kap Industrial and EMedia Holdings

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

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

Diversification Opportunities for Kap Industrial and EMedia Holdings

-0.2

Correlation Coefficient

Kap Industrial  EMedia Holdings

Good diversification

The 3 months correlation between Kap and EMedia is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and eMedia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMedia Holdings and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with EMedia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMedia Holdings has no effect on the direction of Kap Industrial i.e., Kap Industrial and EMedia Holdings go up and down completely randomly.

Pair Corralation between Kap Industrial and EMedia Holdings

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 0.95 times more return on investment than EMedia Holdings. However, Kap Industrial Holdings is 1.05 times less risky than EMedia Holdings. It trades about 0.05 of its potential returns per unit of risk. eMedia Holdings Limited is currently generating about 0.04 per unit of risk. If you would invest  25,600  in Kap Industrial Holdings on September 15, 2024 and sell it today you would earn a total of  5,900  from holding Kap Industrial Holdings or generate 23.05% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  eMedia Holdings Limited

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

eMedia Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eMedia Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EMedia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and EMedia Holdings

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

The idea behind Kap Industrial Holdings and eMedia Holdings Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.