Correlation Between Banks Ultrasector and Kennedy Capital

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

By analyzing existing cross correlation between Banks Ultrasector Profund and Kennedy Capital Small, you can compare the effects of market volatilities on Banks Ultrasector and Kennedy Capital 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 Banks Ultrasector with a short position of Kennedy Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banks Ultrasector and Kennedy Capital.

Diversification Opportunities for Banks Ultrasector and Kennedy Capital

0.9

Correlation Coefficient

Banks Ultrasector  Kennedy Capital

Almost no diversification

The 3 months correlation between Banks and Kennedy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Banks Ultrasector Profund and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small and Banks Ultrasector 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 Banks Ultrasector Profund are associated (or correlated) with Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Banks Ultrasector i.e., Banks Ultrasector and Kennedy Capital go up and down completely randomly.

Pair Corralation between Banks Ultrasector and Kennedy Capital

Assuming the 90 days horizon Banks Ultrasector Profund is expected to generate 2.18 times more return on investment than Kennedy Capital. However, Banks Ultrasector is 2.18 times more volatile than Kennedy Capital Small. It trades about 0.09 of its potential returns per unit of risk. Kennedy Capital Small is currently generating about 0.02 per unit of risk. If you would invest  5,774  in Banks Ultrasector Profund on September 20, 2024 and sell it today you would earn a total of  901.00  from holding Banks Ultrasector Profund or generate 15.6% return on investment over 90 days.

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

Banks Ultrasector Profund  vs.  Kennedy Capital Small

Banks Ultrasector Profund

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banks Ultrasector Profund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Banks Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Kennedy Capital Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kennedy Capital Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Kennedy Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banks Ultrasector and Kennedy Capital

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

The idea behind Banks Ultrasector Profund and Kennedy Capital Small 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.