Correlation Between KIMBALL ELECTRONICS and Northland Power

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

By analyzing existing cross correlation between KIMBALL ELECTRONICS and Northland Power, you can compare the effects of market volatilities on KIMBALL ELECTRONICS and Northland Power 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 KIMBALL ELECTRONICS with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of KIMBALL ELECTRONICS and Northland Power.

Diversification Opportunities for KIMBALL ELECTRONICS and Northland Power

-0.49

Correlation Coefficient

KIMBALL ELECTRONICS  Northland Power

Very good diversification

The 3 months correlation between KIMBALL and Northland is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and KIMBALL ELECTRONICS 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 KIMBALL ELECTRONICS are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and Northland Power go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and Northland Power

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 1.32 times more return on investment than Northland Power. However, KIMBALL ELECTRONICS is 1.32 times more volatile than Northland Power. It trades about 0.08 of its potential returns per unit of risk. Northland Power is currently generating about -0.1 per unit of risk. If you would invest  1,570  in KIMBALL ELECTRONICS on October 8, 2024 and sell it today you would earn a total of  200.00  from holding KIMBALL ELECTRONICS or generate 12.74% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  Northland Power

KIMBALL ELECTRONICS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS reported solid returns over the last few months and may actually be approaching a breakup point.

Northland Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northland Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KIMBALL ELECTRONICS and Northland Power

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

The idea behind KIMBALL ELECTRONICS and Northland Power 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.