Correlation Between K3 Business and United States

Can any of the company-specific risk be diversified away by investing in both K3 Business and United States 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 K3 Business and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K3 Business Technology and United States Steel, you can compare the effects of market volatilities on K3 Business and United States 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 K3 Business with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of K3 Business and United States.

Diversification Opportunities for K3 Business and United States

0.49

Correlation Coefficient

K3 Business  United States

Very weak diversification

The 3 months correlation between KBT and United is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding K3 Business Technology and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and K3 Business 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 K3 Business Technology are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of K3 Business i.e., K3 Business and United States go up and down completely randomly.

Pair Corralation between K3 Business and United States

Assuming the 90 days trading horizon K3 Business is expected to generate 1.44 times less return on investment than United States. In addition to that, K3 Business is 1.53 times more volatile than United States Steel. It trades about 0.09 of its total potential returns per unit of risk. United States Steel is currently generating about 0.2 per unit of volatility. If you would invest  3,130  in United States Steel on December 30, 2024 and sell it today you would earn a total of  1,138  from holding United States Steel or generate 36.36% return on investment over 90 days.

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

K3 Business Technology  vs.  United States Steel

K3 Business Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K3 Business Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, K3 Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K3 Business and United States

The main advantage of trading using opposite K3 Business and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K3 Business position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.

The idea behind K3 Business Technology and United States Steel 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.