Correlation Between DAIRY FARM and KIMBALL ELECTRONICS

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

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

Diversification Opportunities for DAIRY FARM and KIMBALL ELECTRONICS

0.74

Correlation Coefficient

DAIRY FARM  KIMBALL ELECTRONICS

Poor diversification

The 3 months correlation between DAIRY and KIMBALL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS and DAIRY FARM 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 DAIRY FARM INTL are associated (or correlated) with KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and KIMBALL ELECTRONICS go up and down completely randomly.

Pair Corralation between DAIRY FARM and KIMBALL ELECTRONICS

Assuming the 90 days trading horizon DAIRY FARM INTL is expected to under-perform the KIMBALL ELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, DAIRY FARM INTL is 1.08 times less risky than KIMBALL ELECTRONICS. The stock trades about -0.23 of its potential returns per unit of risk. The KIMBALL ELECTRONICS is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  1,860  in KIMBALL ELECTRONICS on September 24, 2024 and sell it today you would lose (130.00) from holding KIMBALL ELECTRONICS or give up 6.99% of portfolio value over 90 days.

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

DAIRY FARM INTL  vs.  KIMBALL ELECTRONICS

DAIRY FARM INTL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DAIRY FARM unveiled solid returns over the last few months and may actually be approaching a breakup point.

KIMBALL ELECTRONICS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, KIMBALL ELECTRONICS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DAIRY FARM and KIMBALL ELECTRONICS

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

The idea behind DAIRY FARM INTL and KIMBALL ELECTRONICS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.