Correlation Between Kap Industrial and Deneb Investments
Can any of the company-specific risk be diversified away by investing in both Kap Industrial and Deneb Investments 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 Kap Industrial and Deneb Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kap Industrial Holdings and Deneb Investments, you can compare the effects of market volatilities on Kap Industrial and Deneb Investments 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 Kap Industrial with a short position of Deneb Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Deneb Investments.
Diversification Opportunities for Kap Industrial and Deneb Investments
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Kap and Deneb is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of Kap Industrial i.e., Kap Industrial and Deneb Investments go up and down completely randomly.
Pair Corralation between Kap Industrial and Deneb Investments
Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Deneb Investments. In addition to that, Kap Industrial is 3.23 times more volatile than Deneb Investments. It trades about -0.03 of its total potential returns per unit of risk. Deneb Investments is currently generating about 0.39 per unit of volatility. If you would invest 24,600 in Deneb Investments on August 24, 2024 and sell it today you would earn a total of 1,300 from holding Deneb Investments or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kap Industrial Holdings vs. Deneb Investments
Performance |
| Timeline |
| Kap Industrial Holdings |
| Deneb Investments |
Kap Industrial and Deneb Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kap Industrial and Deneb Investments
The main advantage of trading using opposite Kap Industrial and Deneb Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial position performs unexpectedly, Deneb Investments 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 Deneb Investments will offset losses from the drop in Deneb Investments' long position.The idea behind Kap Industrial Holdings and Deneb Investments 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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