Correlation Between KL Technology and Mr D

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

By analyzing existing cross correlation between KL Technology and Mr D I, you can compare the effects of market volatilities on KL Technology and Mr D 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 KL Technology with a short position of Mr D. Check out your portfolio center. Please also check ongoing floating volatility patterns of KL Technology and Mr D.

Diversification Opportunities for KL Technology and Mr D

-0.55

Correlation Coefficient

KL Technology  Mr D

Excellent diversification

The 3 months correlation between KLTE and 5296 is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding KL Technology and Mr D I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr D I and KL Technology 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 KL Technology are associated (or correlated) with Mr D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr D I has no effect on the direction of KL Technology i.e., KL Technology and Mr D go up and down completely randomly.

Pair Corralation between KL Technology and Mr D

Assuming the 90 days trading horizon KL Technology is expected to generate 0.56 times more return on investment than Mr D. However, KL Technology is 1.77 times less risky than Mr D. It trades about 0.11 of its potential returns per unit of risk. Mr D I is currently generating about -0.11 per unit of risk. If you would invest  5,896  in KL Technology on September 26, 2024 and sell it today you would earn a total of  514.00  from holding KL Technology or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

KL Technology  vs.  Mr D I

Pair Trading with KL Technology and Mr D

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

The idea behind KL Technology and Mr D I 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.