Correlation Between Coronation Global and Kap Industrial

Can any of the company-specific risk be diversified away by investing in both Coronation Global and Kap Industrial 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 Coronation Global and Kap Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coronation Global Equity and Kap Industrial Holdings, you can compare the effects of market volatilities on Coronation Global and Kap Industrial 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 Coronation Global with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coronation Global and Kap Industrial.

Diversification Opportunities for Coronation Global and Kap Industrial

-0.51

Correlation Coefficient

Coronation Global  Kap Industrial

Excellent diversification

The 3 months correlation between Coronation and Kap is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coronation Global Equity and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and Coronation Global 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 Coronation Global Equity are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of Coronation Global i.e., Coronation Global and Kap Industrial go up and down completely randomly.

Pair Corralation between Coronation Global and Kap Industrial

Assuming the 90 days trading horizon Coronation Global Equity is expected to generate 0.63 times more return on investment than Kap Industrial. However, Coronation Global Equity is 1.59 times less risky than Kap Industrial. It trades about 0.3 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about -0.05 per unit of risk. If you would invest  219.00  in Coronation Global Equity on September 12, 2024 and sell it today you would earn a total of  48.00  from holding Coronation Global Equity or generate 21.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Coronation Global Equity  vs.  Kap Industrial Holdings

Coronation Global Equity

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coronation Global and Kap Industrial

The main advantage of trading using opposite Coronation Global and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coronation Global position performs unexpectedly, Kap Industrial 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 Kap Industrial will offset losses from the drop in Kap Industrial's long position.

The idea behind Coronation Global Equity and Kap Industrial Holdings 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.