Correlation Between KDA and Therma Bright

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

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

Diversification Opportunities for KDA and Therma Bright

0.42

Correlation Coefficient

KDA  Therma Bright

Very weak diversification

The 3 months correlation between KDA and Therma is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Therma Bright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therma Bright and KDA 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 KDA Group are associated (or correlated) with Therma Bright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therma Bright has no effect on the direction of KDA i.e., KDA and Therma Bright go up and down completely randomly.

Pair Corralation between KDA and Therma Bright

Assuming the 90 days horizon KDA Group is expected to generate 0.43 times more return on investment than Therma Bright. However, KDA Group is 2.32 times less risky than Therma Bright. It trades about 0.03 of its potential returns per unit of risk. Therma Bright is currently generating about -0.03 per unit of risk. If you would invest  30.00  in KDA Group on September 23, 2024 and sell it today you would earn a total of  0.00  from holding KDA Group or generate 0.0% return on investment over 90 days.

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

KDA Group  vs.  Therma Bright

KDA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, KDA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Therma Bright

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therma Bright 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 KDA and Therma Bright

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

The idea behind KDA Group and Therma Bright 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.