Correlation Between Steel Connect and Kuke Music

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

By analyzing existing cross correlation between Steel Connect and Kuke Music Holding, you can compare the effects of market volatilities on Steel Connect and Kuke Music 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 Steel Connect with a short position of Kuke Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Connect and Kuke Music.

Diversification Opportunities for Steel Connect and Kuke Music

-0.11

Correlation Coefficient

Steel Connect  Kuke Music

Good diversification

The 3 months correlation between Steel and Kuke is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Steel Connect and Kuke Music Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuke Music Holding and Steel Connect 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 Steel Connect are associated (or correlated) with Kuke Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuke Music Holding has no effect on the direction of Steel Connect i.e., Steel Connect and Kuke Music go up and down completely randomly.

Pair Corralation between Steel Connect and Kuke Music

Given the investment horizon of 90 days Steel Connect is expected to under-perform the Kuke Music. But the stock apears to be less risky and, when comparing its historical volatility, Steel Connect is 16.21 times less risky than Kuke Music. The stock trades about -0.34 of its potential returns per unit of risk. The Kuke Music Holding is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Kuke Music Holding on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Kuke Music Holding or generate 37.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.44%
Values	Daily Returns

Steel Connect  vs.  Kuke Music Holding

Steel Connect

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Steel Connect has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

Kuke Music Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuke Music Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Kuke Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steel Connect and Kuke Music

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

The idea behind Steel Connect and Kuke Music Holding 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.