Correlation Between PURA and KMD

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Can any of the company-specific risk be diversified away by investing in both PURA 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 PURA and KMD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PURA and KMD, you can compare the effects of market volatilities on PURA 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 PURA with a short position of KMD. Check out your portfolio center. Please also check ongoing floating volatility patterns of PURA and KMD.

Diversification Opportunities for PURA and KMD

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between PURA and KMD is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PURA and KMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMD and PURA 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 PURA 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 PURA i.e., PURA and KMD go up and down completely randomly.

Pair Corralation between PURA and KMD

If you would invest  33.00  in KMD on December 30, 2023 and sell it today you would earn a total of  8.00  from holding KMD or generate 24.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy4.55%
ValuesDaily Returns

PURA  vs.  KMD

 Performance 
       Timeline  
PURA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PURA 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

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in KMD are ranked lower than 12 (%) 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.

PURA and KMD Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PURA and KMD

The main advantage of trading using opposite PURA and KMD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PURA 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 PURA 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.
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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