Correlation Between Kumho Industrial and PNC Technologies

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

By analyzing existing cross correlation between Kumho Industrial Co and PNC Technologies co, you can compare the effects of market volatilities on Kumho Industrial and PNC Technologies 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 Kumho Industrial with a short position of PNC Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumho Industrial and PNC Technologies.

Diversification Opportunities for Kumho Industrial and PNC Technologies

0.82

Correlation Coefficient

Kumho Industrial  PNC Technologies

Very poor diversification

The 3 months correlation between Kumho and PNC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Industrial Co and PNC Technologies co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Technologies and Kumho Industrial 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 Kumho Industrial Co are associated (or correlated) with PNC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Technologies has no effect on the direction of Kumho Industrial i.e., Kumho Industrial and PNC Technologies go up and down completely randomly.

Pair Corralation between Kumho Industrial and PNC Technologies

Assuming the 90 days trading horizon Kumho Industrial Co is expected to generate 0.89 times more return on investment than PNC Technologies. However, Kumho Industrial Co is 1.13 times less risky than PNC Technologies. It trades about -0.1 of its potential returns per unit of risk. PNC Technologies co is currently generating about -0.09 per unit of risk. If you would invest  393,500  in Kumho Industrial Co on September 28, 2024 and sell it today you would lose (122,500) from holding Kumho Industrial Co or give up 31.13% of portfolio value over 90 days.

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

Kumho Industrial Co  vs.  PNC Technologies co

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Industrial Co 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

PNC Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PNC Technologies co 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kumho Industrial and PNC Technologies

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

The idea behind Kumho Industrial Co and PNC Technologies co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.