Correlation Between K W and SRI TRANG

Can any of the company-specific risk be diversified away by investing in both K W and SRI TRANG 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 SRI TRANG 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 SRI TRANG GLOVES, you can compare the effects of market volatilities on K W and SRI TRANG 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 SRI TRANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of K W and SRI TRANG.

Diversification Opportunities for K W and SRI TRANG

-0.49

Correlation Coefficient

K W  SRI TRANG

Very good diversification

The 3 months correlation between KWM and SRI is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding K W Metal and SRI TRANG GLOVES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SRI TRANG GLOVES 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 SRI TRANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SRI TRANG GLOVES has no effect on the direction of K W i.e., K W and SRI TRANG go up and down completely randomly.

Pair Corralation between K W and SRI TRANG

Assuming the 90 days trading horizon K W Metal is expected to generate 0.43 times more return on investment than SRI TRANG. However, K W Metal is 2.34 times less risky than SRI TRANG. It trades about -0.35 of its potential returns per unit of risk. SRI TRANG GLOVES is currently generating about -0.19 per unit of risk. If you would invest  128.00  in K W Metal on October 12, 2024 and sell it today you would lose (9.00) from holding K W Metal or give up 7.03% of portfolio value over 90 days.

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

K W Metal  vs.  SRI TRANG GLOVES

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.

SRI TRANG GLOVES

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SRI TRANG GLOVES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, SRI TRANG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K W and SRI TRANG

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

The idea behind K W Metal and SRI TRANG GLOVES 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.