Correlation Between SWISS WATER and KIMBALL ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and KIMBALL ELECTRONICS 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 SWISS WATER and KIMBALL ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and KIMBALL ELECTRONICS, you can compare the effects of market volatilities on SWISS WATER and KIMBALL ELECTRONICS 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 SWISS WATER with a short position of KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and KIMBALL ELECTRONICS.
Diversification Opportunities for SWISS WATER and KIMBALL ELECTRONICS
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SWISS and KIMBALL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with KIMBALL ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBALL ELECTRONICS has no effect on the direction of SWISS WATER i.e., SWISS WATER and KIMBALL ELECTRONICS go up and down completely randomly.
Pair Corralation between SWISS WATER and KIMBALL ELECTRONICS
Assuming the 90 days horizon SWISS WATER is expected to generate 1.11 times less return on investment than KIMBALL ELECTRONICS. But when comparing it to its historical volatility, SWISS WATER DECAFFCOFFEE is 1.72 times less risky than KIMBALL ELECTRONICS. It trades about 0.19 of its potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,650 in KIMBALL ELECTRONICS on September 4, 2024 and sell it today you would earn a total of 160.00 from holding KIMBALL ELECTRONICS or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. KIMBALL ELECTRONICS
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| KIMBALL ELECTRONICS |
SWISS WATER and KIMBALL ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and KIMBALL ELECTRONICS
The main advantage of trading using opposite SWISS WATER and KIMBALL ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS will offset losses from the drop in KIMBALL ELECTRONICS's long position.The idea behind SWISS WATER DECAFFCOFFEE and KIMBALL ELECTRONICS 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.| KIMBALL ELECTRONICS vs. Delta Electronics Public | KIMBALL ELECTRONICS vs. YASKAWA ELEC UNSP | KIMBALL ELECTRONICS vs. VERTIV HOLCL A |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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