Correlation Between National Grid and Kaufman Broad
Can any of the company-specific risk be diversified away by investing in both National Grid and Kaufman Broad 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 National Grid and Kaufman Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Grid plc and Kaufman Broad SA, you can compare the effects of market volatilities on National Grid and Kaufman Broad 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 National Grid with a short position of Kaufman Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Kaufman Broad.
Diversification Opportunities for National Grid and Kaufman Broad
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Kaufman is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding National Grid plc and Kaufman Broad SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaufman Broad SA and National Grid 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 National Grid plc are associated (or correlated) with Kaufman Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaufman Broad SA has no effect on the direction of National Grid i.e., National Grid and Kaufman Broad go up and down completely randomly.
Pair Corralation between National Grid and Kaufman Broad
Assuming the 90 days trading horizon National Grid is expected to generate 1.62 times less return on investment than Kaufman Broad. But when comparing it to its historical volatility, National Grid plc is 1.05 times less risky than Kaufman Broad. It trades about 0.03 of its potential returns per unit of risk. Kaufman Broad SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,462 in Kaufman Broad SA on September 4, 2024 and sell it today you would earn a total of 643.00 from holding Kaufman Broad SA or generate 26.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
National Grid plc vs. Kaufman Broad SA
Performance |
| Timeline |
| National Grid plc |
| Kaufman Broad SA |
National Grid and Kaufman Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Kaufman Broad
The main advantage of trading using opposite National Grid and Kaufman Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid position performs unexpectedly, Kaufman Broad 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 Kaufman Broad will offset losses from the drop in Kaufman Broad's long position.| National Grid vs. Lion Biotechnologies | National Grid vs. Amkor Technology | National Grid vs. SEI INVESTMENTS | National Grid vs. NetSol Technologies |
| Kaufman Broad vs. Sekisui Chemical Co | Kaufman Broad vs. BARRATT DEVEL UNSPADR2 | Kaufman Broad vs. Superior Plus Corp | Kaufman Broad vs. NMI Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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