Correlation Between KOT Addu and JS Investments

Can any of the company-specific risk be diversified away by investing in both KOT Addu and JS Investments 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 JS Investments 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 JS Investments, you can compare the effects of market volatilities on KOT Addu and JS Investments 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 JS Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOT Addu and JS Investments.

Diversification Opportunities for KOT Addu and JS Investments

0.7

Correlation Coefficient

KOT Addu  JS Investments

Poor diversification

The 3 months correlation between KOT and JSIL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments 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 JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of KOT Addu i.e., KOT Addu and JS Investments go up and down completely randomly.

Pair Corralation between KOT Addu and JS Investments

Assuming the 90 days trading horizon KOT Addu Power is expected to generate 0.84 times more return on investment than JS Investments. However, KOT Addu Power is 1.2 times less risky than JS Investments. It trades about 0.38 of its potential returns per unit of risk. JS Investments is currently generating about 0.14 per unit of risk. If you would invest  2,937  in KOT Addu Power on September 15, 2024 and sell it today you would earn a total of  773.00  from holding KOT Addu Power or generate 26.32% return on investment over 90 days.

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

KOT Addu Power  vs.  JS Investments

KOT Addu Power

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOT Addu Power are ranked lower than 16 (%) 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.

JS Investments

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with KOT Addu and JS Investments

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

The idea behind KOT Addu Power and JS Investments 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.