Correlation Between Kap Industrial and NewFunds Low

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

Diversification Opportunities for Kap Industrial and NewFunds Low

0.26

Correlation Coefficient

Kap Industrial  NewFunds Low

Modest diversification

The 3 months correlation between Kap and NewFunds is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and NewFunds Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds Low Volatility 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 NewFunds Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds Low Volatility has no effect on the direction of Kap Industrial i.e., Kap Industrial and NewFunds Low go up and down completely randomly.

Pair Corralation between Kap Industrial and NewFunds Low

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the NewFunds Low. In addition to that, Kap Industrial is 2.74 times more volatile than NewFunds Low Volatility. It trades about -0.03 of its total potential returns per unit of risk. NewFunds Low Volatility is currently generating about 0.13 per unit of volatility. If you would invest  120,700  in NewFunds Low Volatility on September 13, 2024 and sell it today you would earn a total of  5,900  from holding NewFunds Low Volatility or generate 4.89% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  NewFunds Low Volatility

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.

NewFunds Low Volatility

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Low Volatility are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kap Industrial and NewFunds Low

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

The idea behind Kap Industrial Holdings and NewFunds Low Volatility 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.