Correlation Between KCE EL and AGF Management

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

By analyzing existing cross correlation between KCE EL PCL and AGF Management Limited, you can compare the effects of market volatilities on KCE EL and AGF Management 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 KCE EL with a short position of AGF Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCE EL and AGF Management.

Diversification Opportunities for KCE EL and AGF Management

-0.65

Correlation Coefficient

KCE EL  AGF Management

Excellent diversification

The 3 months correlation between KCE and AGF is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding KCE EL PCL and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management and KCE EL 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 KCE EL PCL are associated (or correlated) with AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of KCE EL i.e., KCE EL and AGF Management go up and down completely randomly.

Pair Corralation between KCE EL and AGF Management

Assuming the 90 days trading horizon KCE EL PCL is expected to generate 3.36 times more return on investment than AGF Management. However, KCE EL is 3.36 times more volatile than AGF Management Limited. It trades about 0.04 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.06 per unit of risk. If you would invest  32.00  in KCE EL PCL on October 11, 2024 and sell it today you would earn a total of  35.00  from holding KCE EL PCL or generate 109.38% return on investment over 90 days.

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

KCE EL PCL  vs.  AGF Management Limited

KCE EL PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCE EL PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AGF Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AGF Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KCE EL and AGF Management

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

The idea behind KCE EL PCL and AGF Management Limited 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.