Correlation Between Topicus and Kinaxis

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

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

Diversification Opportunities for Topicus and Kinaxis

-0.61

Correlation Coefficient

Topicus  Kinaxis

Excellent diversification

The 3 months correlation between Topicus and Kinaxis is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Topicus and Kinaxis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinaxis and Topicus 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 Topicus are associated (or correlated) with Kinaxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinaxis has no effect on the direction of Topicus i.e., Topicus and Kinaxis go up and down completely randomly.

Pair Corralation between Topicus and Kinaxis

Assuming the 90 days horizon Topicus is expected to under-perform the Kinaxis. But the stock apears to be less risky and, when comparing its historical volatility, Topicus is 1.29 times less risky than Kinaxis. The stock trades about -0.16 of its potential returns per unit of risk. The Kinaxis is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  15,447  in Kinaxis on September 16, 2024 and sell it today you would earn a total of  2,743  from holding Kinaxis or generate 17.76% return on investment over 90 days.

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

Topicus  vs.  Kinaxis

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Kinaxis

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Topicus and Kinaxis

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

The idea behind Topicus and Kinaxis 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.