Correlation Between KDA and Elcora Advanced

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

By analyzing existing cross correlation between KDA Group and Elcora Advanced Materials, you can compare the effects of market volatilities on KDA and Elcora Advanced 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 KDA with a short position of Elcora Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of KDA and Elcora Advanced.

Diversification Opportunities for KDA and Elcora Advanced

-0.57

Correlation Coefficient

KDA  Elcora Advanced

Excellent diversification

The 3 months correlation between KDA and Elcora is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Elcora Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcora Advanced Materials and KDA 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 KDA Group are associated (or correlated) with Elcora Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcora Advanced Materials has no effect on the direction of KDA i.e., KDA and Elcora Advanced go up and down completely randomly.

Pair Corralation between KDA and Elcora Advanced

Assuming the 90 days horizon KDA Group is expected to generate 0.58 times more return on investment than Elcora Advanced. However, KDA Group is 1.71 times less risky than Elcora Advanced. It trades about 0.08 of its potential returns per unit of risk. Elcora Advanced Materials is currently generating about 0.04 per unit of risk. If you would invest  14.00  in KDA Group on October 3, 2024 and sell it today you would earn a total of  16.00  from holding KDA Group or generate 114.29% return on investment over 90 days.

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

KDA Group  vs.  Elcora Advanced Materials

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elcora Advanced Materials

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elcora Advanced Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Elcora Advanced showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KDA and Elcora Advanced

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

The idea behind KDA Group and Elcora Advanced Materials 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.