Correlation Between KIMBALL ELECTRONICS and North American

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and North American

0.74

Correlation Coefficient

KIMBALL ELECTRONICS  North American

Poor diversification

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

Pair Corralation between KIMBALL ELECTRONICS and North American

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to under-perform the North American. In addition to that, KIMBALL ELECTRONICS is 1.08 times more volatile than North American Construction. It trades about -0.04 of its total potential returns per unit of risk. North American Construction is currently generating about 0.03 per unit of volatility. If you would invest  1,838  in North American Construction on September 20, 2024 and sell it today you would earn a total of  162.00  from holding North American Construction or generate 8.81% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  North American Construction

KIMBALL ELECTRONICS

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIMBALL ELECTRONICS are ranked lower than 3 (%) 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 January 2025.

North American Const

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KIMBALL ELECTRONICS and North American

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

The idea behind KIMBALL ELECTRONICS and North American Construction 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.