Correlation Between Key Tronic and Super Micro

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

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

Diversification Opportunities for Key Tronic and Super Micro

0.05

Correlation Coefficient

Key Tronic  Super Micro

Significant diversification

The 3 months correlation between Key and Super is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer and Key Tronic 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 Key Tronic are associated (or correlated) with Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Key Tronic i.e., Key Tronic and Super Micro go up and down completely randomly.

Pair Corralation between Key Tronic and Super Micro

Given the investment horizon of 90 days Key Tronic is expected to under-perform the Super Micro. But the stock apears to be less risky and, when comparing its historical volatility, Key Tronic is 4.24 times less risky than Super Micro. The stock trades about -0.24 of its potential returns per unit of risk. The Super Micro Computer is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,197  in Super Micro Computer on September 27, 2024 and sell it today you would lose (764.00) from holding Super Micro Computer or give up 18.2% of portfolio value over 90 days.

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

Key Tronic  vs.  Super Micro Computer

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Super Micro Computer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Super Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Key Tronic and Super Micro

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

The idea behind Key Tronic and Super Micro Computer 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.