Correlation Between TCI and KNH Enterprise

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

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

Diversification Opportunities for TCI and KNH Enterprise

0.87

Correlation Coefficient

TCI  KNH Enterprise

Very poor diversification

The 3 months correlation between TCI and KNH is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding TCI Co and KNH Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNH Enterprise and TCI 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 TCI Co are associated (or correlated) with KNH Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNH Enterprise has no effect on the direction of TCI i.e., TCI and KNH Enterprise go up and down completely randomly.

Pair Corralation between TCI and KNH Enterprise

Assuming the 90 days trading horizon TCI Co is expected to under-perform the KNH Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, TCI Co is 1.28 times less risky than KNH Enterprise. The stock trades about -0.09 of its potential returns per unit of risk. The KNH Enterprise Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,350  in KNH Enterprise Co on September 29, 2024 and sell it today you would lose (245.00) from holding KNH Enterprise Co or give up 10.43% of portfolio value over 90 days.

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

TCI Co  vs.  KNH Enterprise Co

TCI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TCI Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

KNH Enterprise

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNH Enterprise Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KNH Enterprise may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TCI and KNH Enterprise

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

The idea behind TCI Co and KNH Enterprise 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.