Correlation Between Kronos Advanced and REQ

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

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

Diversification Opportunities for Kronos Advanced and REQ

0.39

Correlation Coefficient

Kronos Advanced  REQ

Weak diversification

The 3 months correlation between Kronos and REQ is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kronos Advanced Technologies and REQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REQ and Kronos Advanced 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 Kronos Advanced Technologies are associated (or correlated) with REQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REQ has no effect on the direction of Kronos Advanced i.e., Kronos Advanced and REQ go up and down completely randomly.

Pair Corralation between Kronos Advanced and REQ

Given the investment horizon of 90 days Kronos Advanced Technologies is expected to generate 2.55 times more return on investment than REQ. However, Kronos Advanced is 2.55 times more volatile than REQ. It trades about 0.1 of its potential returns per unit of risk. REQ is currently generating about 0.11 per unit of risk. If you would invest  0.55  in Kronos Advanced Technologies on September 3, 2024 and sell it today you would earn a total of  0.25  from holding Kronos Advanced Technologies or generate 45.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Kronos Advanced Technologies  vs.  REQ

Kronos Advanced Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos Advanced Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kronos Advanced unveiled solid returns over the last few months and may actually be approaching a breakup point.

REQ

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REQ are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REQ exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kronos Advanced and REQ

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

The idea behind Kronos Advanced Technologies and REQ 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.