Correlation Between Wam Leaders and Kip McGrath
Can any of the company-specific risk be diversified away by investing in both Wam Leaders and Kip McGrath 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 Wam Leaders and Kip McGrath into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wam Leaders and Kip McGrath Education, you can compare the effects of market volatilities on Wam Leaders and Kip McGrath 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 Wam Leaders with a short position of Kip McGrath. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wam Leaders and Kip McGrath.
Diversification Opportunities for Wam Leaders and Kip McGrath
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wam and Kip is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wam Leaders and Kip McGrath Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kip McGrath Education and Wam Leaders 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 Wam Leaders are associated (or correlated) with Kip McGrath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kip McGrath Education has no effect on the direction of Wam Leaders i.e., Wam Leaders and Kip McGrath go up and down completely randomly.
Pair Corralation between Wam Leaders and Kip McGrath
Assuming the 90 days trading horizon Wam Leaders is expected to under-perform the Kip McGrath. But the stock apears to be less risky and, when comparing its historical volatility, Wam Leaders is 2.25 times less risky than Kip McGrath. The stock trades about -0.29 of its potential returns per unit of risk. The Kip McGrath Education is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 41.00 in Kip McGrath Education on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Kip McGrath Education or generate 19.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wam Leaders vs. Kip McGrath Education
Performance |
| Timeline |
| Wam Leaders |
| Kip McGrath Education |
Wam Leaders and Kip McGrath Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wam Leaders and Kip McGrath
The main advantage of trading using opposite Wam Leaders and Kip McGrath positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wam Leaders position performs unexpectedly, Kip McGrath 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 Kip McGrath will offset losses from the drop in Kip McGrath's long position.| Wam Leaders vs. National Australia Bank | Wam Leaders vs. National Australia Bank | Wam Leaders vs. Westpac Banking | Wam Leaders vs. National Australia Bank |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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