Correlation Between Kap Industrial and SLM Corp

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

Diversification Opportunities for Kap Industrial and SLM Corp

-0.17

Correlation Coefficient

Kap Industrial  SLM Corp

Good diversification

The 3 months correlation between Kap and SLM is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Sanlam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Kap Industrial i.e., Kap Industrial and SLM Corp go up and down completely randomly.

Pair Corralation between Kap Industrial and SLM Corp

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the SLM Corp. In addition to that, Kap Industrial is 1.72 times more volatile than Sanlam. It trades about -0.04 of its total potential returns per unit of risk. Sanlam is currently generating about 0.09 per unit of volatility. If you would invest  867,300  in Sanlam on September 12, 2024 and sell it today you would earn a total of  47,400  from holding Sanlam or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Kap Industrial Holdings  vs.  Sanlam

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.

SLM Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SLM Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kap Industrial and SLM Corp

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

The idea behind Kap Industrial Holdings and Sanlam 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.