Correlation Between Khgears International and Gem Terminal

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

By analyzing existing cross correlation between Khgears International Limited and Gem Terminal Industry, you can compare the effects of market volatilities on Khgears International and Gem Terminal 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 Khgears International with a short position of Gem Terminal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khgears International and Gem Terminal.

Diversification Opportunities for Khgears International and Gem Terminal

-0.38

Correlation Coefficient

Khgears International  Gem Terminal

Very good diversification

The 3 months correlation between Khgears and Gem is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Khgears International Limited and Gem Terminal Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Terminal Industry and Khgears International 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 Khgears International Limited are associated (or correlated) with Gem Terminal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Terminal Industry has no effect on the direction of Khgears International i.e., Khgears International and Gem Terminal go up and down completely randomly.

Pair Corralation between Khgears International and Gem Terminal

Assuming the 90 days trading horizon Khgears International Limited is expected to generate 2.68 times more return on investment than Gem Terminal. However, Khgears International is 2.68 times more volatile than Gem Terminal Industry. It trades about 0.38 of its potential returns per unit of risk. Gem Terminal Industry is currently generating about -0.27 per unit of risk. If you would invest  17,900  in Khgears International Limited on September 23, 2024 and sell it today you would earn a total of  7,300  from holding Khgears International Limited or generate 40.78% return on investment over 90 days.

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

Khgears International Limited  vs.  Gem Terminal Industry

Khgears International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khgears International Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Khgears International showed solid returns over the last few months and may actually be approaching a breakup point.

Gem Terminal Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gem Terminal Industry 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Khgears International and Gem Terminal

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

The idea behind Khgears International Limited and Gem Terminal Industry 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.