Correlation Between Kafrit and Rimoni
Can any of the company-specific risk be diversified away by investing in both Kafrit and Rimoni 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 Kafrit and Rimoni into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kafrit and Rimoni, you can compare the effects of market volatilities on Kafrit and Rimoni 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 Kafrit with a short position of Rimoni. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kafrit and Rimoni.
Diversification Opportunities for Kafrit and Rimoni
Modest diversification
The 3 months correlation between Kafrit and Rimoni is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kafrit and Rimoni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimoni and Kafrit 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 Kafrit are associated (or correlated) with Rimoni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimoni has no effect on the direction of Kafrit i.e., Kafrit and Rimoni go up and down completely randomly.
Pair Corralation between Kafrit and Rimoni
Assuming the 90 days trading horizon Kafrit is expected to generate 2.9 times more return on investment than Rimoni. However, Kafrit is 2.9 times more volatile than Rimoni. It trades about 0.08 of its potential returns per unit of risk. Rimoni is currently generating about -0.15 per unit of risk. If you would invest 323,900 in Kafrit on November 22, 2024 and sell it today you would earn a total of 12,400 from holding Kafrit or generate 3.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kafrit vs. Rimoni
Performance |
| Timeline |
| Kafrit |
| Rimoni |
Kafrit and Rimoni Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kafrit and Rimoni
The main advantage of trading using opposite Kafrit and Rimoni positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kafrit position performs unexpectedly, Rimoni 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 Rimoni will offset losses from the drop in Rimoni's long position.The idea behind Kafrit and Rimoni 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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