Correlation Between KC Metalsheet and SCB X

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

By analyzing existing cross correlation between KC Metalsheet Public and SCB X Public, you can compare the effects of market volatilities on KC Metalsheet and SCB X 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 KC Metalsheet with a short position of SCB X. Check out your portfolio center. Please also check ongoing floating volatility patterns of KC Metalsheet and SCB X.

Diversification Opportunities for KC Metalsheet and SCB X

-0.86

Correlation Coefficient

KC Metalsheet  SCB X

Pay attention - limited upside

The 3 months correlation between KCM and SCB is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding KC Metalsheet Public and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public and KC Metalsheet 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 KC Metalsheet Public are associated (or correlated) with SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of KC Metalsheet i.e., KC Metalsheet and SCB X go up and down completely randomly.

Pair Corralation between KC Metalsheet and SCB X

Assuming the 90 days trading horizon KC Metalsheet Public is expected to generate 61.23 times more return on investment than SCB X. However, KC Metalsheet is 61.23 times more volatile than SCB X Public. It trades about 0.06 of its potential returns per unit of risk. SCB X Public is currently generating about 0.1 per unit of risk. If you would invest  38.00  in KC Metalsheet Public on October 9, 2024 and sell it today you would lose (11.00) from holding KC Metalsheet Public or give up 28.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

KC Metalsheet Public  vs.  SCB X Public

KC Metalsheet Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KC Metalsheet Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SCB X Public

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KC Metalsheet and SCB X

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

The idea behind KC Metalsheet Public and SCB X Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.