Correlation Between Kinko Optical and Leatec Fine
Can any of the company-specific risk be diversified away by investing in both Kinko Optical and Leatec Fine 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 Kinko Optical and Leatec Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kinko Optical Co and Leatec Fine Ceramics, you can compare the effects of market volatilities on Kinko Optical and Leatec Fine 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 Kinko Optical with a short position of Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinko Optical and Leatec Fine.
Diversification Opportunities for Kinko Optical and Leatec Fine
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kinko and Leatec is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kinko Optical Co and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics and Kinko Optical 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 Kinko Optical Co are associated (or correlated) with Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of Kinko Optical i.e., Kinko Optical and Leatec Fine go up and down completely randomly.
Pair Corralation between Kinko Optical and Leatec Fine
Assuming the 90 days trading horizon Kinko Optical Co is expected to generate 0.93 times more return on investment than Leatec Fine. However, Kinko Optical Co is 1.08 times less risky than Leatec Fine. It trades about 0.05 of its potential returns per unit of risk. Leatec Fine Ceramics is currently generating about -0.04 per unit of risk. If you would invest 2,495 in Kinko Optical Co on November 6, 2024 and sell it today you would earn a total of 170.00 from holding Kinko Optical Co or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinko Optical Co vs. Leatec Fine Ceramics
Performance |
| Timeline |
| Kinko Optical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Leatec Fine Ceramics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Kinko Optical and Leatec Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinko Optical and Leatec Fine
The main advantage of trading using opposite Kinko Optical and Leatec Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinko Optical position performs unexpectedly, Leatec Fine 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 Leatec Fine will offset losses from the drop in Leatec Fine's long position.The idea behind Kinko Optical Co and Leatec Fine Ceramics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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