Correlation Between Kukil Metal and WISE ITech

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

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

Diversification Opportunities for Kukil Metal and WISE ITech

0.66

Correlation Coefficient

Kukil Metal  WISE ITech

Poor diversification

The 3 months correlation between Kukil and WISE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kukil Metal Co and WISE iTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE iTech and Kukil Metal 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 Kukil Metal Co are associated (or correlated) with WISE ITech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE iTech has no effect on the direction of Kukil Metal i.e., Kukil Metal and WISE ITech go up and down completely randomly.

Pair Corralation between Kukil Metal and WISE ITech

Assuming the 90 days trading horizon Kukil Metal Co is expected to under-perform the WISE ITech. But the stock apears to be less risky and, when comparing its historical volatility, Kukil Metal Co is 2.96 times less risky than WISE ITech. The stock trades about -0.31 of its potential returns per unit of risk. The WISE iTech Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  436,000  in WISE iTech Co on August 31, 2024 and sell it today you would earn a total of  50,000  from holding WISE iTech Co or generate 11.47% return on investment over 90 days.

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

Kukil Metal Co  vs.  WISE iTech Co

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukil 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

WISE iTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WISE iTech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WISE ITech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kukil Metal and WISE ITech

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

The idea behind Kukil Metal Co and WISE iTech 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.