Correlation Between KIMBALL ELECTRONICS and Watsco

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and Watsco

0.83

Correlation Coefficient

KIMBALL ELECTRONICS  Watsco

Very poor diversification

The 3 months correlation between KIMBALL and Watsco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc 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 Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and Watsco go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and Watsco

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to under-perform the Watsco. In addition to that, KIMBALL ELECTRONICS is 1.51 times more volatile than Watsco Inc. It trades about -0.02 of its total potential returns per unit of risk. Watsco Inc is currently generating about 0.03 per unit of volatility. If you would invest  43,666  in Watsco Inc on October 9, 2024 and sell it today you would earn a total of  2,394  from holding Watsco Inc or generate 5.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.4%
Values	Daily Returns

KIMBALL ELECTRONICS  vs.  Watsco Inc

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.

Watsco Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Watsco Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Watsco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KIMBALL ELECTRONICS and Watsco

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

The idea behind KIMBALL ELECTRONICS and Watsco Inc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.