Correlation Between KCC Engineering and Homecast CoLtd

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

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

Diversification Opportunities for KCC Engineering and Homecast CoLtd

0.21

Correlation Coefficient

KCC Engineering  Homecast CoLtd

Modest diversification

The 3 months correlation between KCC and Homecast is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and KCC Engineering 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 KCC Engineering Construction are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of KCC Engineering i.e., KCC Engineering and Homecast CoLtd go up and down completely randomly.

Pair Corralation between KCC Engineering and Homecast CoLtd

Assuming the 90 days trading horizon KCC Engineering Construction is expected to under-perform the Homecast CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, KCC Engineering Construction is 2.23 times less risky than Homecast CoLtd. The stock trades about -0.05 of its potential returns per unit of risk. The Homecast CoLtd is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  418,000  in Homecast CoLtd on February 23, 2024 and sell it today you would lose (125,500) from holding Homecast CoLtd or give up 30.02% of portfolio value over 90 days.

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

KCC Engineering Construction  vs.  Homecast CoLtd

KCC Engineering Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCC Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Homecast CoLtd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Homecast CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Homecast CoLtd may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with KCC Engineering and Homecast CoLtd

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

The idea behind KCC Engineering Construction and Homecast CoLtd 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.