Correlation Between Dexterra and K Bro

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

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

Diversification Opportunities for Dexterra and K Bro

0.91

Correlation Coefficient

Dexterra  K Bro

Almost no diversification

The 3 months correlation between Dexterra and KBL is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dexterra Group 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 Dexterra 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 Dexterra Group 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 Dexterra i.e., Dexterra and K Bro go up and down completely randomly.

Pair Corralation between Dexterra and K Bro

Assuming the 90 days trading horizon Dexterra Group is expected to generate 1.14 times more return on investment than K Bro. However, Dexterra is 1.14 times more volatile than K Bro Linen. It trades about 0.15 of its potential returns per unit of risk. K Bro Linen is currently generating about 0.07 per unit of risk. If you would invest  663.00  in Dexterra Group on September 15, 2024 and sell it today you would earn a total of  90.00  from holding Dexterra Group or generate 13.57% return on investment over 90 days.

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

Dexterra Group  vs.  K Bro Linen

Dexterra Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dexterra Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dexterra displayed solid returns over the last few months and may actually be approaching a breakup point.

K Bro Linen

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in K Bro Linen are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, K Bro is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dexterra and K Bro

The main advantage of trading using opposite Dexterra and K Bro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dexterra 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 Dexterra Group 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.