Correlation Between Kap Industrial and Arrowhead Properties

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

By analyzing existing cross correlation between Kap Industrial Holdings and Arrowhead Properties Ltd, you can compare the effects of market volatilities on Kap Industrial and Arrowhead Properties 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 Kap Industrial with a short position of Arrowhead Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Arrowhead Properties.

Diversification Opportunities for Kap Industrial and Arrowhead Properties

-0.29

Correlation Coefficient

Kap Industrial  Arrowhead Properties

Very good diversification

The 3 months correlation between Kap and Arrowhead is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Arrowhead Properties Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowhead Properties and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with Arrowhead Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowhead Properties has no effect on the direction of Kap Industrial i.e., Kap Industrial and Arrowhead Properties go up and down completely randomly.

Pair Corralation between Kap Industrial and Arrowhead Properties

Assuming the 90 days trading horizon Kap Industrial is expected to generate 1.99 times less return on investment than Arrowhead Properties. In addition to that, Kap Industrial is 1.39 times more volatile than Arrowhead Properties Ltd. It trades about 0.04 of its total potential returns per unit of risk. Arrowhead Properties Ltd is currently generating about 0.1 per unit of volatility. If you would invest  28,281  in Arrowhead Properties Ltd on September 12, 2024 and sell it today you would earn a total of  22,319  from holding Arrowhead Properties Ltd or generate 78.92% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  Arrowhead Properties Ltd

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arrowhead Properties

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Properties Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Arrowhead Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and Arrowhead Properties

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

The idea behind Kap Industrial Holdings and Arrowhead Properties Ltd 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.