Correlation Between Investment and Kennedy Capital

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

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

Diversification Opportunities for Investment and Kennedy Capital

0.75

Correlation Coefficient

Investment  Kennedy Capital

Poor diversification

The 3 months correlation between Investment and Kennedy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small and Investment 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 Investment Of America are associated (or correlated) with Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Investment i.e., Investment and Kennedy Capital go up and down completely randomly.

Pair Corralation between Investment and Kennedy Capital

Assuming the 90 days horizon Investment Of America is expected to under-perform the Kennedy Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Investment Of America is 1.13 times less risky than Kennedy Capital. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Kennedy Capital Small is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,251  in Kennedy Capital Small on September 22, 2024 and sell it today you would lose (41.00) from holding Kennedy Capital Small or give up 3.28% of portfolio value over 90 days.

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

Investment Of America  vs.  Kennedy Capital Small

Investment Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment Of America has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kennedy Capital Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kennedy Capital Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Kennedy Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investment and Kennedy Capital

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

The idea behind Investment Of America and Kennedy Capital Small 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.