Correlation Between Kaman and Tel Instrument

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

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

Diversification Opportunities for Kaman and Tel Instrument

0.52

Correlation Coefficient

Kaman  Tel Instrument

Very weak diversification

The 3 months correlation between Kaman and Tel is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kaman and Tel Instrument Electronics Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tel Instrument Elect and Kaman 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 Kaman are associated (or correlated) with Tel Instrument. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tel Instrument Elect has no effect on the direction of Kaman i.e., Kaman and Tel Instrument go up and down completely randomly.

Pair Corralation between Kaman and Tel Instrument

Given the investment horizon of 90 days Kaman is expected to generate 0.76 times more return on investment than Tel Instrument. However, Kaman is 1.31 times less risky than Tel Instrument. It trades about 0.06 of its potential returns per unit of risk. Tel Instrument Electronics Corp is currently generating about 0.02 per unit of risk. If you would invest  2,017  in Kaman on September 5, 2024 and sell it today you would earn a total of  385.00  from holding Kaman or generate 19.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.34%
Values	Daily Returns

Kaman  vs.  Tel Instrument Electronics Cor

Kaman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Kaman is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Tel Instrument Elect

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tel Instrument Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Tel Instrument is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kaman and Tel Instrument

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

The idea behind Kaman and Tel Instrument Electronics Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.