Correlation Between Arca Continental and Kimberly Clark

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Can any of the company-specific risk be diversified away by investing in both Arca Continental and Kimberly Clark 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 Arca Continental and Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arca Continental SAB and Kimberly Clark de Mxico, you can compare the effects of market volatilities on Arca Continental and Kimberly Clark 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 Arca Continental with a short position of Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arca Continental and Kimberly Clark.

Diversification Opportunities for Arca Continental and Kimberly Clark

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Arca and Kimberly is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Arca Continental SAB and Kimberly Clark de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de and Arca Continental 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 Arca Continental SAB are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of Arca Continental i.e., Arca Continental and Kimberly Clark go up and down completely randomly.

Pair Corralation between Arca Continental and Kimberly Clark

Assuming the 90 days horizon Arca Continental SAB is expected to generate 1.2 times more return on investment than Kimberly Clark. However, Arca Continental is 1.2 times more volatile than Kimberly Clark de Mxico. It trades about 0.03 of its potential returns per unit of risk. Kimberly Clark de Mxico is currently generating about -0.24 per unit of risk. If you would invest  17,069  in Arca Continental SAB on September 1, 2024 and sell it today you would earn a total of  135.00  from holding Arca Continental SAB or generate 0.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Arca Continental SAB  vs.  Kimberly Clark de Mxico

 Performance 
       Timeline  
Arca Continental SAB 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Kimberly Clark de 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kimberly Clark de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Arca Continental and Kimberly Clark Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arca Continental and Kimberly Clark

The main advantage of trading using opposite Arca Continental and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arca Continental position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.
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The idea behind Arca Continental SAB and Kimberly Clark de Mxico 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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