Correlation Between KIMBALL ELECTRONICS and BANNER

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and BANNER

0.74

Correlation Coefficient

KIMBALL ELECTRONICS  BANNER

Poor diversification

The 3 months correlation between KIMBALL and BANNER is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and BANNER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANNER 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 BANNER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANNER has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and BANNER go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and BANNER

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 1.06 times more return on investment than BANNER. However, KIMBALL ELECTRONICS is 1.06 times more volatile than BANNER. It trades about -0.01 of its potential returns per unit of risk. BANNER is currently generating about -0.2 per unit of risk. If you would invest  1,780  in KIMBALL ELECTRONICS on October 16, 2024 and sell it today you would lose (10.00) from holding KIMBALL ELECTRONICS or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

KIMBALL ELECTRONICS  vs.  BANNER

KIMBALL ELECTRONICS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KIMBALL ELECTRONICS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BANNER

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BANNER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, BANNER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KIMBALL ELECTRONICS and BANNER

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

The idea behind KIMBALL ELECTRONICS and BANNER 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.