Correlation Between CSL and KCE Electronics

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

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

Diversification Opportunities for CSL and KCE Electronics

-0.11

Correlation Coefficient

CSL  KCE Electronics

Good diversification

The 3 months correlation between CSL and KCE is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and KCE Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCE Electronics Public and CSL 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 CSL Limited are associated (or correlated) with KCE Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCE Electronics Public has no effect on the direction of CSL i.e., CSL and KCE Electronics go up and down completely randomly.

Pair Corralation between CSL and KCE Electronics

Assuming the 90 days horizon CSL is expected to generate 3.66 times less return on investment than KCE Electronics. But when comparing it to its historical volatility, CSL Limited is 1.17 times less risky than KCE Electronics. It trades about 0.08 of its potential returns per unit of risk. KCE Electronics Public is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  42.00  in KCE Electronics Public on April 20, 2025 and sell it today you would earn a total of  14.00  from holding KCE Electronics Public or generate 33.33% return on investment over 90 days.

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

CSL Limited  vs.  KCE Electronics Public

CSL Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CSL Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in August 2025.

KCE Electronics Public

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KCE Electronics Public are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, KCE Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSL and KCE Electronics

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

The idea behind CSL Limited and KCE Electronics Public 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 Global Correlations module to find global opportunities by holding instruments from different markets.