Correlation Between KMD and BRC
Can any of the company-specific risk be diversified away by investing in both KMD and BRC 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 KMD and BRC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KMD and BRC, you can compare the effects of market volatilities on KMD and BRC 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 KMD with a short position of BRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMD and BRC.
Diversification Opportunities for KMD and BRC
Pay attention - limited upside
The 3 months correlation between KMD and BRC is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding KMD and BRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC and KMD 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 KMD are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC has no effect on the direction of KMD i.e., KMD and BRC go up and down completely randomly.
Pair Corralation between KMD and BRC
If you would invest 34.00 in KMD on January 19, 2024 and sell it today you would earn a total of 5.00 from holding KMD or generate 14.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 4.35% |
| Values | Daily Returns |
KMD vs. BRC
Performance |
| Timeline |
| KMD |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
KMD and BRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KMD and BRC
The main advantage of trading using opposite KMD and BRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMD position performs unexpectedly, BRC 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 BRC will offset losses from the drop in BRC's long position.The idea behind KMD and BRC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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