Correlation Between Emdoor Information and King Strong

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

By analyzing existing cross correlation between Emdoor Information Co and King Strong New Material, you can compare the effects of market volatilities on Emdoor Information and King Strong 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 Emdoor Information with a short position of King Strong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emdoor Information and King Strong.

Diversification Opportunities for Emdoor Information and King Strong

0.79

Correlation Coefficient

Emdoor Information  King Strong

Poor diversification

The 3 months correlation between Emdoor and King is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Emdoor Information Co and King Strong New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Strong New and Emdoor Information 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 Emdoor Information Co are associated (or correlated) with King Strong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Strong New has no effect on the direction of Emdoor Information i.e., Emdoor Information and King Strong go up and down completely randomly.

Pair Corralation between Emdoor Information and King Strong

Assuming the 90 days trading horizon Emdoor Information Co is expected to generate 1.93 times more return on investment than King Strong. However, Emdoor Information is 1.93 times more volatile than King Strong New Material. It trades about 0.07 of its potential returns per unit of risk. King Strong New Material is currently generating about -0.08 per unit of risk. If you would invest  5,147  in Emdoor Information Co on September 28, 2024 and sell it today you would earn a total of  227.00  from holding Emdoor Information Co or generate 4.41% return on investment over 90 days.

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

Emdoor Information Co  vs.  King Strong New Material

Emdoor Information

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emdoor Information Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Emdoor Information sustained solid returns over the last few months and may actually be approaching a breakup point.

King Strong New

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King Strong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emdoor Information and King Strong

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

The idea behind Emdoor Information Co and King Strong New Material 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.