Correlation Between Diamond Fields and K Bro

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

By analyzing existing cross correlation between Diamond Fields Resources and K Bro Linen, you can compare the effects of market volatilities on Diamond Fields and K Bro 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 Diamond Fields with a short position of K Bro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Fields and K Bro.

Diversification Opportunities for Diamond Fields and K Bro

-0.63

Correlation Coefficient

Diamond Fields  K Bro

Excellent diversification

The 3 months correlation between Diamond and KBL is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Fields Resources and K Bro Linen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Bro Linen and Diamond Fields 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 Diamond Fields Resources are associated (or correlated) with K Bro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Bro Linen has no effect on the direction of Diamond Fields i.e., Diamond Fields and K Bro go up and down completely randomly.

Pair Corralation between Diamond Fields and K Bro

Assuming the 90 days horizon Diamond Fields Resources is expected to under-perform the K Bro. In addition to that, Diamond Fields is 11.57 times more volatile than K Bro Linen. It trades about -0.01 of its total potential returns per unit of risk. K Bro Linen is currently generating about 0.19 per unit of volatility. If you would invest  3,688  in K Bro Linen on September 22, 2024 and sell it today you would earn a total of  162.00  from holding K Bro Linen or generate 4.39% return on investment over 90 days.

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

Diamond Fields Resources  vs.  K Bro Linen

Diamond Fields Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Fields Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Diamond Fields may actually be approaching a critical reversion point that can send shares even higher in January 2025.

K Bro Linen

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K Bro Linen are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, K Bro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Diamond Fields and K Bro

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

The idea behind Diamond Fields Resources and K Bro Linen 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.