Correlation Between KOT Addu and AKD Hospitality

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

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

Diversification Opportunities for KOT Addu and AKD Hospitality

0.81

Correlation Coefficient

KOT Addu  AKD Hospitality

Very poor diversification

The 3 months correlation between KOT and AKD is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality and KOT Addu 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 KOT Addu Power are associated (or correlated) with AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of KOT Addu i.e., KOT Addu and AKD Hospitality go up and down completely randomly.

Pair Corralation between KOT Addu and AKD Hospitality

Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.61 times more return on investment than AKD Hospitality. However, KOT Addu Power is 1.63 times less risky than AKD Hospitality. It trades about 0.2 of its potential returns per unit of risk. AKD Hospitality is currently generating about 0.06 per unit of risk. If you would invest  3,527  in KOT Addu Power on October 4, 2024 and sell it today you would earn a total of  233.00  from holding KOT Addu Power or generate 6.61% return on investment over 90 days.

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

KOT Addu Power  vs.  AKD Hospitality

KOT Addu Power

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOT Addu Power are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, KOT Addu disclosed solid returns over the last few months and may actually be approaching a breakup point.

AKD Hospitality

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, AKD Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KOT Addu and AKD Hospitality

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

The idea behind KOT Addu Power and AKD Hospitality 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.