Correlation Between Kingstate Electronics and Forest Water

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

By analyzing existing cross correlation between Kingstate Electronics and Forest Water Environmental, you can compare the effects of market volatilities on Kingstate Electronics and Forest Water 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 Kingstate Electronics with a short position of Forest Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingstate Electronics and Forest Water.

Diversification Opportunities for Kingstate Electronics and Forest Water

0.85

Correlation Coefficient

Kingstate Electronics  Forest Water

Very poor diversification

The 3 months correlation between Kingstate and Forest is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kingstate Electronics and Forest Water Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forest Water Environ and Kingstate Electronics 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 Kingstate Electronics are associated (or correlated) with Forest Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forest Water Environ has no effect on the direction of Kingstate Electronics i.e., Kingstate Electronics and Forest Water go up and down completely randomly.

Pair Corralation between Kingstate Electronics and Forest Water

Assuming the 90 days trading horizon Kingstate Electronics is expected to generate 0.77 times more return on investment than Forest Water. However, Kingstate Electronics is 1.3 times less risky than Forest Water. It trades about -0.17 of its potential returns per unit of risk. Forest Water Environmental is currently generating about -0.24 per unit of risk. If you would invest  4,875  in Kingstate Electronics on August 31, 2024 and sell it today you would lose (655.00) from holding Kingstate Electronics or give up 13.44% of portfolio value over 90 days.

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

Kingstate Electronics  vs.  Forest Water Environmental

Kingstate Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingstate Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Forest Water Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forest Water Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Kingstate Electronics and Forest Water

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

The idea behind Kingstate Electronics and Forest Water Environmental 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.