Correlation Between UNISEM and Kbi Metal

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

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

Diversification Opportunities for UNISEM and Kbi Metal

0.87

Correlation Coefficient

UNISEM  Kbi Metal

Very poor diversification

The 3 months correlation between UNISEM and Kbi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding UNISEM Co and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and UNISEM 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 UNISEM Co are associated (or correlated) with Kbi Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kbi Metal has no effect on the direction of UNISEM i.e., UNISEM and Kbi Metal go up and down completely randomly.

Pair Corralation between UNISEM and Kbi Metal

Assuming the 90 days trading horizon UNISEM Co is expected to generate 0.83 times more return on investment than Kbi Metal. However, UNISEM Co is 1.2 times less risky than Kbi Metal. It trades about -0.08 of its potential returns per unit of risk. Kbi Metal Co is currently generating about -0.16 per unit of risk. If you would invest  709,000  in UNISEM Co on September 3, 2024 and sell it today you would lose (117,000) from holding UNISEM Co or give up 16.5% of portfolio value over 90 days.

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

UNISEM Co  vs.  Kbi Metal Co

UNISEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNISEM 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.

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal 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 UNISEM and Kbi Metal

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

The idea behind UNISEM Co and Kbi Metal 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.