Correlation Between Supremex and K Bro

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

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

Diversification Opportunities for Supremex and K Bro

-0.17

Correlation Coefficient

Supremex  K Bro

Good diversification

The 3 months correlation between Supremex and KBL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Supremex and K Bro Linen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Bro Linen and Supremex 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 Supremex are associated (or correlated) with K Bro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Bro Linen has no effect on the direction of Supremex i.e., Supremex and K Bro go up and down completely randomly.

Pair Corralation between Supremex and K Bro

Assuming the 90 days trading horizon Supremex is expected to under-perform the K Bro. In addition to that, Supremex is 1.66 times more volatile than K Bro Linen. It trades about -0.01 of its total potential returns per unit of risk. K Bro Linen is currently generating about 0.05 per unit of volatility. If you would invest  2,678  in K Bro Linen on September 2, 2024 and sell it today you would earn a total of  1,137  from holding K Bro Linen or generate 42.46% return on investment over 90 days.

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

Supremex  vs.  K Bro Linen

Supremex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supremex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Supremex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

K Bro Linen

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K Bro Linen are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, K Bro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Supremex and K Bro

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

The idea behind Supremex and K Bro Linen 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .