Correlation Between Louisa Professional and Kinko Optical

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

By analyzing existing cross correlation between Louisa Professional Coffee and Kinko Optical Co, you can compare the effects of market volatilities on Louisa Professional and Kinko Optical 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 Louisa Professional with a short position of Kinko Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Louisa Professional and Kinko Optical.

Diversification Opportunities for Louisa Professional and Kinko Optical

0.09

Correlation Coefficient

Louisa Professional  Kinko Optical

Significant diversification

The 3 months correlation between Louisa and Kinko is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Louisa Professional Coffee and Kinko Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinko Optical and Louisa Professional 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 Louisa Professional Coffee are associated (or correlated) with Kinko Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinko Optical has no effect on the direction of Louisa Professional i.e., Louisa Professional and Kinko Optical go up and down completely randomly.

Pair Corralation between Louisa Professional and Kinko Optical

Assuming the 90 days trading horizon Louisa Professional is expected to generate 13.38 times less return on investment than Kinko Optical. But when comparing it to its historical volatility, Louisa Professional Coffee is 2.07 times less risky than Kinko Optical. It trades about 0.02 of its potential returns per unit of risk. Kinko Optical Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,480  in Kinko Optical Co on December 2, 2024 and sell it today you would earn a total of  695.00  from holding Kinko Optical Co or generate 28.02% return on investment over 90 days.

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

Louisa Professional Coffee  vs.  Kinko Optical Co

Louisa Professional

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Louisa Professional Coffee are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Louisa Professional is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kinko Optical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinko Optical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kinko Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Louisa Professional and Kinko Optical

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

The idea behind Louisa Professional Coffee and Kinko Optical Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..