Correlation Between Road Studio and Kool2play

Can any of the company-specific risk be diversified away by investing in both Road Studio and Kool2play 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 Road Studio and Kool2play into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Road Studio SA and Kool2play SA, you can compare the effects of market volatilities on Road Studio and Kool2play 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 Road Studio with a short position of Kool2play. Check out your portfolio center. Please also check ongoing floating volatility patterns of Road Studio and Kool2play.

Diversification Opportunities for Road Studio and Kool2play

0.0

Correlation Coefficient

Road Studio  Kool2play

Pay attention - limited upside

The 3 months correlation between Road and Kool2play is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Road Studio SA and Kool2play SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kool2play SA and Road Studio 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 Road Studio SA are associated (or correlated) with Kool2play. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kool2play SA has no effect on the direction of Road Studio i.e., Road Studio and Kool2play go up and down completely randomly.

Pair Corralation between Road Studio and Kool2play

Assuming the 90 days trading horizon Road Studio is expected to generate 1.77 times less return on investment than Kool2play. But when comparing it to its historical volatility, Road Studio SA is 1.65 times less risky than Kool2play. It trades about 0.13 of its potential returns per unit of risk. Kool2play SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  93.00  in Kool2play SA on November 29, 2024 and sell it today you would earn a total of  32.00  from holding Kool2play SA or generate 34.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	67.27%
Values	Daily Returns

Road Studio SA  vs.  Kool2play SA

Road Studio SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Road Studio SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Road Studio reported solid returns over the last few months and may actually be approaching a breakup point.

Kool2play SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kool2play SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kool2play reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Road Studio and Kool2play

The main advantage of trading using opposite Road Studio and Kool2play positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Road Studio position performs unexpectedly, Kool2play 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 Kool2play will offset losses from the drop in Kool2play's long position.

The idea behind Road Studio SA and Kool2play SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..