Correlation Between KCE Electronics and TWZ Public

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

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

Diversification Opportunities for KCE Electronics and TWZ Public

0.43

Correlation Coefficient

KCE Electronics  TWZ Public

Very weak diversification

The 3 months correlation between KCE and TWZ is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding KCE Electronics Public and TWZ Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWZ Public and KCE 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 KCE Electronics Public are associated (or correlated) with TWZ Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWZ Public has no effect on the direction of KCE Electronics i.e., KCE Electronics and TWZ Public go up and down completely randomly.

Pair Corralation between KCE Electronics and TWZ Public

Assuming the 90 days trading horizon KCE Electronics Public is expected to under-perform the TWZ Public. But the stock apears to be less risky and, when comparing its historical volatility, KCE Electronics Public is 19.51 times less risky than TWZ Public. The stock trades about -0.04 of its potential returns per unit of risk. The TWZ Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6.00  in TWZ Public on September 13, 2024 and sell it today you would lose (3.00) from holding TWZ Public or give up 50.0% of portfolio value over 90 days.

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

KCE Electronics Public  vs.  TWZ Public

KCE Electronics Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCE Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TWZ Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TWZ Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TWZ Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KCE Electronics and TWZ Public

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

The idea behind KCE Electronics Public and TWZ Public 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.