Correlation Between KIMBALL ELECTRONICS and Telkom SA

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and Telkom SA

0.54

Correlation Coefficient

KIMBALL ELECTRONICS  Telkom SA

Very weak diversification

The 3 months correlation between KIMBALL and Telkom is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and Telkom SA SOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom SA SOC 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 Telkom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom SA SOC has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and Telkom SA go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and Telkom SA

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to generate 0.63 times more return on investment than Telkom SA. However, KIMBALL ELECTRONICS is 1.6 times less risky than Telkom SA. It trades about -0.03 of its potential returns per unit of risk. Telkom SA SOC is currently generating about -0.22 per unit of risk. If you would invest  1,790  in KIMBALL ELECTRONICS on October 9, 2024 and sell it today you would lose (20.00) from holding KIMBALL ELECTRONICS or give up 1.12% of portfolio value over 90 days.

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

KIMBALL ELECTRONICS  vs.  Telkom SA SOC

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.

Telkom SA SOC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom SA SOC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Telkom SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KIMBALL ELECTRONICS and Telkom SA

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

The idea behind KIMBALL ELECTRONICS and Telkom SA SOC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.