Correlation Between KCI and Fine Besteel

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

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

Diversification Opportunities for KCI and Fine Besteel

-0.79

Correlation Coefficient

KCI  Fine Besteel

Pay attention - limited upside

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

Pair Corralation between KCI and Fine Besteel

Assuming the 90 days trading horizon KCI Limited is expected to generate 0.85 times more return on investment than Fine Besteel. However, KCI Limited is 1.17 times less risky than Fine Besteel. It trades about 0.08 of its potential returns per unit of risk. Fine Besteel Co is currently generating about -0.08 per unit of risk. If you would invest  663,000  in KCI Limited on September 21, 2024 and sell it today you would earn a total of  25,000  from holding KCI Limited or generate 3.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

KCI Limited  vs.  Fine Besteel Co

KCI Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fine Besteel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KCI and Fine Besteel

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

The idea behind KCI Limited and Fine Besteel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.