Can any of the company-specific risk be diversified away by investing in both Comcast Corp and KonaTel 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 Comcast Corp and KonaTel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Comcast Corp and KonaTel, you can compare the effects of market volatilities on Comcast Corp and KonaTel 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 Comcast Corp with a short position of KonaTel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comcast Corp and KonaTel.
Diversification Opportunities for Comcast Corp and KonaTel
The 3 months correlation between Comcast and KonaTel is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Comcast Corp and KonaTel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KonaTel and Comcast Corp 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 Comcast Corp are associated (or correlated) with KonaTel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KonaTel has no effect on the direction of Comcast Corp i.e., Comcast Corp and KonaTel go up and down completely randomly.
Assuming the 90 days horizon Comcast Corp is expected to under-perform the KonaTel. But the stock apears to be less risky and, when comparing its historical volatility, Comcast Corp is 5.51 times less risky than KonaTel. The stock trades about -0.05 of its potential returns per unit of risk. The KonaTel is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 52.00 in KonaTel on March 6, 2024 and sell it today you would earn a total of 15.00 from holding KonaTel or generate 28.85% return on investment over 90 days.
Over the last 90 days Comcast Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Comcast Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in KonaTel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, KonaTel disclosed solid returns over the last few months and may actually be approaching a breakup point.