Correlation Between KIMBALL ELECTRONICS and Rio Tinto

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

By analyzing existing cross correlation between KIMBALL ELECTRONICS and Rio Tinto Group, you can compare the effects of market volatilities on KIMBALL ELECTRONICS and Rio Tinto 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 Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of KIMBALL ELECTRONICS and Rio Tinto.

Diversification Opportunities for KIMBALL ELECTRONICS and Rio Tinto

-0.06

Correlation Coefficient

KIMBALL ELECTRONICS  Rio Tinto

Good diversification

The 3 months correlation between KIMBALL and Rio is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group 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 Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto Group has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and Rio Tinto go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and Rio Tinto

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 1.39 times more return on investment than Rio Tinto. However, KIMBALL ELECTRONICS is 1.39 times more volatile than Rio Tinto Group. It trades about 0.19 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.16 per unit of risk. If you would invest  1,740  in KIMBALL ELECTRONICS on October 24, 2024 and sell it today you would earn a total of  90.00  from holding KIMBALL ELECTRONICS or generate 5.17% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  Rio Tinto Group

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 uncertain basic indicators, KIMBALL ELECTRONICS reported solid returns over the last few months and may actually be approaching a breakup point.

Rio Tinto Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KIMBALL ELECTRONICS and Rio Tinto

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

The idea behind KIMBALL ELECTRONICS and Rio Tinto Group 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.