Correlation Between Benchmark Electronics and KIMBALL ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Benchmark Electronics 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 Benchmark Electronics and KIMBALL ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Benchmark Electronics and KIMBALL ELECTRONICS, you can compare the effects of market volatilities on Benchmark Electronics 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 Benchmark Electronics with a short position of KIMBALL ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and KIMBALL ELECTRONICS.
Diversification Opportunities for Benchmark Electronics and KIMBALL ELECTRONICS
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Benchmark and KIMBALL is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and KIMBALL ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBALL ELECTRONICS and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and KIMBALL ELECTRONICS go up and down completely randomly.
Pair Corralation between Benchmark Electronics and KIMBALL ELECTRONICS
Assuming the 90 days horizon Benchmark Electronics is expected to generate 0.97 times more return on investment than KIMBALL ELECTRONICS. However, Benchmark Electronics is 1.03 times less risky than KIMBALL ELECTRONICS. It trades about 0.06 of its potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about 0.0 per unit of risk. If you would invest 2,586 in Benchmark Electronics on August 25, 2024 and sell it today you would earn a total of 1,834 from holding Benchmark Electronics or generate 70.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Benchmark Electronics vs. KIMBALL ELECTRONICS
Performance |
| Timeline |
| Benchmark Electronics |
| KIMBALL ELECTRONICS |
Benchmark Electronics and KIMBALL ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Benchmark Electronics and KIMBALL ELECTRONICS
The main advantage of trading using opposite Benchmark Electronics and KIMBALL ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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