Correlation Between Kimball Electronics and Solid Power

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

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

Diversification Opportunities for Kimball Electronics and Solid Power

-0.56

Correlation Coefficient

Kimball Electronics  Solid Power

Excellent diversification

The 3 months correlation between Kimball and Solid is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Solid Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solid Power and Kimball Electronics 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 Kimball Electronics are associated (or correlated) with Solid Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solid Power has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Solid Power go up and down completely randomly.

Pair Corralation between Kimball Electronics and Solid Power

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 0.64 times more return on investment than Solid Power. However, Kimball Electronics is 1.55 times less risky than Solid Power. It trades about 0.1 of its potential returns per unit of risk. Solid Power is currently generating about -0.04 per unit of risk. If you would invest  1,800  in Kimball Electronics on September 4, 2024 and sell it today you would earn a total of  227.00  from holding Kimball Electronics or generate 12.61% return on investment over 90 days.

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

Kimball Electronics  vs.  Solid Power

Kimball Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Kimball Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Solid Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solid Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Kimball Electronics and Solid Power

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

The idea behind Kimball Electronics and Solid Power 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.