Correlation Between KIMBALL ELECTRONICS and STMICROELECTRONICS

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and STMICROELECTRONICS

-0.54

Correlation Coefficient

KIMBALL ELECTRONICS  STMICROELECTRONICS

Excellent diversification

The 3 months correlation between KIMBALL and STMICROELECTRONICS is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS are associated (or correlated) with STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and STMICROELECTRONICS

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 1.53 times more return on investment than STMICROELECTRONICS. However, KIMBALL ELECTRONICS is 1.53 times more volatile than STMICROELECTRONICS. It trades about 0.05 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.09 per unit of risk. If you would invest  1,630  in KIMBALL ELECTRONICS on September 28, 2024 and sell it today you would earn a total of  110.00  from holding KIMBALL ELECTRONICS or generate 6.75% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  STMICROELECTRONICS

KIMBALL ELECTRONICS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with KIMBALL ELECTRONICS and STMICROELECTRONICS

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

The idea behind KIMBALL ELECTRONICS and STMICROELECTRONICS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.