Correlation Between Kadimastem and Sarfati

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

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

Diversification Opportunities for Kadimastem and Sarfati

0.86

Correlation Coefficient

Kadimastem  Sarfati

Very poor diversification

The 3 months correlation between Kadimastem and Sarfati is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kadimastem and Sarfati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarfati and Kadimastem 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 Kadimastem are associated (or correlated) with Sarfati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarfati has no effect on the direction of Kadimastem i.e., Kadimastem and Sarfati go up and down completely randomly.

Pair Corralation between Kadimastem and Sarfati

Assuming the 90 days trading horizon Kadimastem is expected to generate 5.37 times more return on investment than Sarfati. However, Kadimastem is 5.37 times more volatile than Sarfati. It trades about 0.14 of its potential returns per unit of risk. Sarfati is currently generating about 0.24 per unit of risk. If you would invest  79,500  in Kadimastem on September 28, 2024 and sell it today you would earn a total of  38,400  from holding Kadimastem or generate 48.3% return on investment over 90 days.

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

Kadimastem  vs.  Sarfati

Kadimastem

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kadimastem are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kadimastem sustained solid returns over the last few months and may actually be approaching a breakup point.

Sarfati

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sarfati are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sarfati sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kadimastem and Sarfati

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

The idea behind Kadimastem and Sarfati 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.