Correlation Between Universal Corp and Kforce

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

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

Diversification Opportunities for Universal Corp and Kforce

0.61

Correlation Coefficient

Universal Corp  Kforce

Poor diversification

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

Pair Corralation between Universal Corp and Kforce

Assuming the 90 days trading horizon Universal Corp is expected to under-perform the Kforce. But the stock apears to be less risky and, when comparing its historical volatility, Universal Corp is 1.25 times less risky than Kforce. The stock trades about -0.22 of its potential returns per unit of risk. The Kforce Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,364  in Kforce Inc on September 23, 2024 and sell it today you would lose (14.00) from holding Kforce Inc or give up 0.26% of portfolio value over 90 days.

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

Universal Corp  vs.  Kforce Inc

Universal Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Universal Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kforce Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kforce is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Corp and Kforce

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

The idea behind Universal Corp and Kforce Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.