Correlation Between K Bro and Transcontinental

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

By analyzing existing cross correlation between K Bro Linen and Transcontinental, you can compare the effects of market volatilities on K Bro and Transcontinental 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 K Bro with a short position of Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Bro and Transcontinental.

Diversification Opportunities for K Bro and Transcontinental

-0.13

Correlation Coefficient

K Bro  Transcontinental

Good diversification

The 3 months correlation between KBL and Transcontinental is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding K Bro Linen and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental and K Bro 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 K Bro Linen are associated (or correlated) with Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of K Bro i.e., K Bro and Transcontinental go up and down completely randomly.

Pair Corralation between K Bro and Transcontinental

Assuming the 90 days trading horizon K Bro is expected to generate 1.49 times less return on investment than Transcontinental. But when comparing it to its historical volatility, K Bro Linen is 1.26 times less risky than Transcontinental. It trades about 0.09 of its potential returns per unit of risk. Transcontinental is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,635  in Transcontinental on September 14, 2024 and sell it today you would earn a total of  166.00  from holding Transcontinental or generate 10.15% return on investment over 90 days.

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

K Bro Linen  vs.  Transcontinental

K Bro Linen

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in K Bro Linen are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, K Bro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Transcontinental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with K Bro and Transcontinental

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

The idea behind K Bro Linen and Transcontinental 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.