Correlation Between Matson and Kirby
Can any of the company-specific risk be diversified away by investing in both Matson and Kirby 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 Matson and Kirby into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matson Inc and Kirby, you can compare the effects of market volatilities on Matson and Kirby 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 Matson with a short position of Kirby. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matson and Kirby.
Diversification Opportunities for Matson and Kirby
Almost no diversification
The 3 months correlation between Matson and Kirby is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Matson Inc and Kirby in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirby and Matson 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 Matson Inc are associated (or correlated) with Kirby. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirby has no effect on the direction of Matson i.e., Matson and Kirby go up and down completely randomly.
Pair Corralation between Matson and Kirby
Given the investment horizon of 90 days Matson is expected to generate 1.52 times less return on investment than Kirby. In addition to that, Matson is 1.11 times more volatile than Kirby. It trades about 0.05 of its total potential returns per unit of risk. Kirby is currently generating about 0.08 per unit of volatility. If you would invest 7,695 in Kirby on November 9, 2024 and sell it today you would earn a total of 3,020 from holding Kirby or generate 39.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matson Inc vs. Kirby
Performance |
| Timeline |
| Matson Inc |
| Kirby |
Matson and Kirby Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matson and Kirby
The main advantage of trading using opposite Matson and Kirby positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matson position performs unexpectedly, Kirby 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 Kirby will offset losses from the drop in Kirby's long position.The idea behind Matson Inc and Kirby 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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