Correlation Between Kap Industrial and GSETNC

Can any of the company-specific risk be diversified away by investing in both Kap Industrial and GSETNC 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 GSETNC 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 GSETNC, you can compare the effects of market volatilities on Kap Industrial and GSETNC 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 GSETNC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and GSETNC.

Diversification Opportunities for Kap Industrial and GSETNC

-0.62

Correlation Coefficient

Kap Industrial  GSETNC

Excellent diversification

The 3 months correlation between Kap and GSETNC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and GSETNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSETNC 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 GSETNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSETNC has no effect on the direction of Kap Industrial i.e., Kap Industrial and GSETNC go up and down completely randomly.

Pair Corralation between Kap Industrial and GSETNC

Assuming the 90 days trading horizon Kap Industrial is expected to generate 135.37 times less return on investment than GSETNC. But when comparing it to its historical volatility, Kap Industrial Holdings is 1.86 times less risky than GSETNC. It trades about 0.0 of its potential returns per unit of risk. GSETNC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  301,100  in GSETNC on September 1, 2024 and sell it today you would earn a total of  65,500  from holding GSETNC or generate 21.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	50.0%
Values	Daily Returns

Kap Industrial Holdings  vs.  GSETNC

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.

GSETNC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSETNC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, GSETNC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and GSETNC

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

The idea behind Kap Industrial Holdings and GSETNC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.