Correlation Between Kinik and Kaori Heat

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

By analyzing existing cross correlation between Kinik Co and Kaori Heat Treatment, you can compare the effects of market volatilities on Kinik and Kaori Heat 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 Kinik with a short position of Kaori Heat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinik and Kaori Heat.

Diversification Opportunities for Kinik and Kaori Heat

0.25

Correlation Coefficient

Kinik  Kaori Heat

Modest diversification

The 3 months correlation between Kinik and Kaori is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kinik Co and Kaori Heat Treatment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaori Heat Treatment and Kinik 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 Kinik Co are associated (or correlated) with Kaori Heat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaori Heat Treatment has no effect on the direction of Kinik i.e., Kinik and Kaori Heat go up and down completely randomly.

Pair Corralation between Kinik and Kaori Heat

Assuming the 90 days trading horizon Kinik Co is expected to generate 0.75 times more return on investment than Kaori Heat. However, Kinik Co is 1.33 times less risky than Kaori Heat. It trades about -0.04 of its potential returns per unit of risk. Kaori Heat Treatment is currently generating about -0.11 per unit of risk. If you would invest  32,100  in Kinik Co on September 25, 2024 and sell it today you would lose (2,700) from holding Kinik Co or give up 8.41% of portfolio value over 90 days.

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

Kinik Co  vs.  Kaori Heat Treatment

Kinik

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinik Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Kaori Heat Treatment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaori Heat Treatment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Kinik and Kaori Heat

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

The idea behind Kinik Co and Kaori Heat Treatment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.