Correlation Between ECOVE Environment and Kingstate Electronics

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

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

Diversification Opportunities for ECOVE Environment and Kingstate Electronics

0.64

Correlation Coefficient

ECOVE Environment  Kingstate Electronics

Poor diversification

The 3 months correlation between ECOVE and Kingstate is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ECOVE Environment Corp and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics and ECOVE Environment 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 ECOVE Environment Corp are associated (or correlated) with Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of ECOVE Environment i.e., ECOVE Environment and Kingstate Electronics go up and down completely randomly.

Pair Corralation between ECOVE Environment and Kingstate Electronics

Assuming the 90 days trading horizon ECOVE Environment is expected to generate 1.82 times less return on investment than Kingstate Electronics. But when comparing it to its historical volatility, ECOVE Environment Corp is 2.49 times less risky than Kingstate Electronics. It trades about 0.07 of its potential returns per unit of risk. Kingstate Electronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,930  in Kingstate Electronics on September 22, 2024 and sell it today you would earn a total of  1,235  from holding Kingstate Electronics or generate 42.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

ECOVE Environment Corp  vs.  Kingstate Electronics

ECOVE Environment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECOVE Environment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ECOVE Environment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ECOVE Environment and Kingstate Electronics

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

The idea behind ECOVE Environment Corp and Kingstate Electronics 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.