Correlation Between KGI Securities and TMT Steel

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

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

Diversification Opportunities for KGI Securities and TMT Steel

0.96

Correlation Coefficient

KGI Securities  TMT Steel

Almost no diversification

The 3 months correlation between KGI and TMT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding KGI Securities Public and TMT Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Steel Public and KGI Securities 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 KGI Securities Public are associated (or correlated) with TMT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Steel Public has no effect on the direction of KGI Securities i.e., KGI Securities and TMT Steel go up and down completely randomly.

Pair Corralation between KGI Securities and TMT Steel

Assuming the 90 days trading horizon KGI Securities Public is expected to under-perform the TMT Steel. But the stock apears to be less risky and, when comparing its historical volatility, KGI Securities Public is 58.34 times less risky than TMT Steel. The stock trades about -0.02 of its potential returns per unit of risk. The TMT Steel Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  757.00  in TMT Steel Public on October 23, 2024 and sell it today you would lose (459.00) from holding TMT Steel Public or give up 60.63% of portfolio value over 90 days.

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

KGI Securities Public  vs.  TMT Steel Public

KGI Securities Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KGI Securities Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, KGI Securities is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

TMT Steel Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMT Steel 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 basic 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.

Pair Trading with KGI Securities and TMT Steel

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

The idea behind KGI Securities Public and TMT Steel 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 Global Correlations module to find global opportunities by holding instruments from different markets.