Correlation Between Kirby and Cool
Can any of the company-specific risk be diversified away by investing in both Kirby and Cool 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 Kirby and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kirby and Cool Company, you can compare the effects of market volatilities on Kirby and Cool 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 Kirby with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kirby and Cool.
Diversification Opportunities for Kirby and Cool
Good diversification
The 3 months correlation between Kirby and Cool is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kirby and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Kirby 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 Kirby are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Kirby i.e., Kirby and Cool go up and down completely randomly.
Pair Corralation between Kirby and Cool
Considering the 90-day investment horizon Kirby is expected to generate 0.76 times more return on investment than Cool. However, Kirby is 1.31 times less risky than Cool. It trades about 0.11 of its potential returns per unit of risk. Cool Company is currently generating about -0.18 per unit of risk. If you would invest 12,183 in Kirby on August 24, 2024 and sell it today you would earn a total of 698.00 from holding Kirby or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kirby vs. Cool Company
Performance |
| Timeline |
| Kirby |
| Cool Company |
Kirby and Cool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kirby and Cool
The main advantage of trading using opposite Kirby and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirby position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.The idea behind Kirby and Cool Company 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |