Correlation Between KL Technology and LPI Capital

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

By analyzing existing cross correlation between KL Technology and LPI Capital Bhd, you can compare the effects of market volatilities on KL Technology and LPI Capital 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 KL Technology with a short position of LPI Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of KL Technology and LPI Capital.

Diversification Opportunities for KL Technology and LPI Capital

-0.76

Correlation Coefficient

KL Technology  LPI Capital

Pay attention - limited upside

The 3 months correlation between KLTE and LPI is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding KL Technology and LPI Capital Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPI Capital Bhd and KL Technology 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 KL Technology are associated (or correlated) with LPI Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPI Capital Bhd has no effect on the direction of KL Technology i.e., KL Technology and LPI Capital go up and down completely randomly.

Pair Corralation between KL Technology and LPI Capital

Assuming the 90 days trading horizon KL Technology is expected to under-perform the LPI Capital. In addition to that, KL Technology is 1.49 times more volatile than LPI Capital Bhd. It trades about -0.24 of its total potential returns per unit of risk. LPI Capital Bhd is currently generating about 0.25 per unit of volatility. If you would invest  1,215  in LPI Capital Bhd on December 30, 2024 and sell it today you would earn a total of  225.00  from holding LPI Capital Bhd or generate 18.52% return on investment over 90 days.

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

KL Technology  vs.  LPI Capital Bhd

Pair Trading with KL Technology and LPI Capital

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

The idea behind KL Technology and LPI Capital Bhd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.