Correlation Between Klil Industries and Kafrit

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

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

Diversification Opportunities for Klil Industries and Kafrit

0.32

Correlation Coefficient

Klil Industries  Kafrit

Weak diversification

The 3 months correlation between Klil and Kafrit is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Klil Industries and Kafrit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kafrit and Klil Industries 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 Klil Industries are associated (or correlated) with Kafrit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kafrit has no effect on the direction of Klil Industries i.e., Klil Industries and Kafrit go up and down completely randomly.

Pair Corralation between Klil Industries and Kafrit

Assuming the 90 days trading horizon Klil Industries is expected to generate 1.74 times more return on investment than Kafrit. However, Klil Industries is 1.74 times more volatile than Kafrit. It trades about 0.24 of its potential returns per unit of risk. Kafrit is currently generating about 0.15 per unit of risk. If you would invest  2,029,000  in Klil Industries on September 12, 2024 and sell it today you would earn a total of  776,000  from holding Klil Industries or generate 38.25% return on investment over 90 days.

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

Klil Industries  vs.  Kafrit

Klil Industries

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Klil Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Klil Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Kafrit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kafrit are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kafrit sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Klil Industries and Kafrit

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

The idea behind Klil Industries and Kafrit 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.