Correlation Between STPI Public and KC Metalsheet

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

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

Diversification Opportunities for STPI Public and KC Metalsheet

0.89

Correlation Coefficient

STPI Public  KC Metalsheet

Very poor diversification

The 3 months correlation between STPI and KCM is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding STPI Public and KC Metalsheet Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KC Metalsheet Public and STPI Public 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 STPI Public are associated (or correlated) with KC Metalsheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KC Metalsheet Public has no effect on the direction of STPI Public i.e., STPI Public and KC Metalsheet go up and down completely randomly.

Pair Corralation between STPI Public and KC Metalsheet

Assuming the 90 days trading horizon STPI Public is expected to under-perform the KC Metalsheet. But the stock apears to be less risky and, when comparing its historical volatility, STPI Public is 1.79 times less risky than KC Metalsheet. The stock trades about -0.24 of its potential returns per unit of risk. The KC Metalsheet Public is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  29.00  in KC Metalsheet Public on December 2, 2024 and sell it today you would lose (9.00) from holding KC Metalsheet Public or give up 31.03% of portfolio value over 90 days.

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

STPI Public  vs.  KC Metalsheet Public

STPI Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days STPI 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

KC Metalsheet Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days KC Metalsheet Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with STPI Public and KC Metalsheet

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

The idea behind STPI Public and KC Metalsheet 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.