Correlation Between K W and More Return

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

By analyzing existing cross correlation between K W Metal and More Return Public, you can compare the effects of market volatilities on K W and More Return 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 K W with a short position of More Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of K W and More Return.

Diversification Opportunities for K W and More Return

0.55

Correlation Coefficient

K W  More Return

Very weak diversification

The 3 months correlation between KWM and More is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding K W Metal and More Return Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on More Return Public and K W 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 K W Metal are associated (or correlated) with More Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of More Return Public has no effect on the direction of K W i.e., K W and More Return go up and down completely randomly.

Pair Corralation between K W and More Return

Assuming the 90 days trading horizon K W Metal is expected to generate 0.98 times more return on investment than More Return. However, K W Metal is 1.02 times less risky than More Return. It trades about 0.04 of its potential returns per unit of risk. More Return Public is currently generating about 0.04 per unit of risk. If you would invest  242.00  in K W Metal on October 5, 2024 and sell it today you would lose (122.00) from holding K W Metal or give up 50.41% of portfolio value over 90 days.

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

K W Metal  vs.  More Return Public

K W Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K W Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

More Return Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days More Return Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals 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 K W and More Return

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

The idea behind K W Metal and More Return 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.