Correlation Between TOPC and KMD

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

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

Diversification Opportunities for TOPC and KMD

0.0

Correlation Coefficient

TOPC  KMD

Pay attention - limited upside

The 3 months correlation between TOPC and KMD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TOPC and KMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMD and TOPC 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 TOPC are associated (or correlated) with KMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMD has no effect on the direction of TOPC i.e., TOPC and KMD go up and down completely randomly.

Pair Corralation between TOPC and KMD

If you would invest  23.00  in KMD on September 1, 2024 and sell it today you would earn a total of  10.00  from holding KMD or generate 43.48% return on investment over 90 days.

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

TOPC  vs.  KMD

TOPC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, TOPC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KMD

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KMD are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KMD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TOPC and KMD

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

The idea behind TOPC and KMD 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.