Correlation Between VERTIV HOLCL and KIMBALL ELECTRONICS

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

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

Diversification Opportunities for VERTIV HOLCL and KIMBALL ELECTRONICS

0.74

Correlation Coefficient

VERTIV HOLCL  KIMBALL ELECTRONICS

Poor diversification

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

Pair Corralation between VERTIV HOLCL and KIMBALL ELECTRONICS

Assuming the 90 days horizon VERTIV HOLCL A is expected to under-perform the KIMBALL ELECTRONICS. In addition to that, VERTIV HOLCL is 2.93 times more volatile than KIMBALL ELECTRONICS. It trades about -0.1 of its total potential returns per unit of risk. KIMBALL ELECTRONICS is currently generating about -0.1 per unit of volatility. If you would invest  1,770  in KIMBALL ELECTRONICS on December 30, 2024 and sell it today you would lose (230.00) from holding KIMBALL ELECTRONICS or give up 12.99% of portfolio value over 90 days.

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

VERTIV HOLCL A  vs.  KIMBALL ELECTRONICS

VERTIV HOLCL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days VERTIV HOLCL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KIMBALL ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIMBALL ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with VERTIV HOLCL and KIMBALL ELECTRONICS

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

The idea behind VERTIV HOLCL A and KIMBALL ELECTRONICS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.