Correlation Between CSL and Kinatico
Can any of the company-specific risk be diversified away by investing in both CSL and Kinatico 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 CSL and Kinatico into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Kinatico, you can compare the effects of market volatilities on CSL and Kinatico 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 CSL with a short position of Kinatico. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Kinatico.
Diversification Opportunities for CSL and Kinatico
Very good diversification
The 3 months correlation between CSL and Kinatico is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Kinatico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinatico and CSL 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 CSL are associated (or correlated) with Kinatico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinatico has no effect on the direction of CSL i.e., CSL and Kinatico go up and down completely randomly.
Pair Corralation between CSL and Kinatico
Assuming the 90 days trading horizon CSL is expected to generate 3.35 times less return on investment than Kinatico. But when comparing it to its historical volatility, CSL is 3.41 times less risky than Kinatico. It trades about 0.05 of its potential returns per unit of risk. Kinatico is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9.70 in Kinatico on August 25, 2024 and sell it today you would earn a total of 3.30 from holding Kinatico or generate 34.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Kinatico
Performance |
| Timeline |
| CSL |
| Kinatico |
CSL and Kinatico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Kinatico
The main advantage of trading using opposite CSL and Kinatico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Kinatico 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 Kinatico will offset losses from the drop in Kinatico's long position.The idea behind CSL and Kinatico 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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