Correlation Between Kits Eyecare and Information Services

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

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

Diversification Opportunities for Kits Eyecare and Information Services

0.04

Correlation Coefficient

Kits Eyecare  Information Services

Significant diversification

The 3 months correlation between Kits and Information is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Kits Eyecare and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and Kits Eyecare 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 Kits Eyecare are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of Kits Eyecare i.e., Kits Eyecare and Information Services go up and down completely randomly.

Pair Corralation between Kits Eyecare and Information Services

Assuming the 90 days trading horizon Kits Eyecare is expected to under-perform the Information Services. In addition to that, Kits Eyecare is 2.16 times more volatile than Information Services. It trades about -0.09 of its total potential returns per unit of risk. Information Services is currently generating about 0.02 per unit of volatility. If you would invest  2,703  in Information Services on September 2, 2024 and sell it today you would earn a total of  22.00  from holding Information Services or generate 0.81% return on investment over 90 days.

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

Kits Eyecare  vs.  Information Services

Kits Eyecare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kits Eyecare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Information Services

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Information Services is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kits Eyecare and Information Services

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

The idea behind Kits Eyecare and Information Services 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.