Correlation Between XAC Automation and Kaulin Mfg

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

By analyzing existing cross correlation between XAC Automation and Kaulin Mfg, you can compare the effects of market volatilities on XAC Automation and Kaulin Mfg 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 XAC Automation with a short position of Kaulin Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of XAC Automation and Kaulin Mfg.

Diversification Opportunities for XAC Automation and Kaulin Mfg

0.7

Correlation Coefficient

XAC Automation  Kaulin Mfg

Poor diversification

The 3 months correlation between XAC and Kaulin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding XAC Automation and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg and XAC Automation 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 XAC Automation are associated (or correlated) with Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of XAC Automation i.e., XAC Automation and Kaulin Mfg go up and down completely randomly.

Pair Corralation between XAC Automation and Kaulin Mfg

Assuming the 90 days trading horizon XAC Automation is expected to generate 1.9 times more return on investment than Kaulin Mfg. However, XAC Automation is 1.9 times more volatile than Kaulin Mfg. It trades about 0.0 of its potential returns per unit of risk. Kaulin Mfg is currently generating about -0.05 per unit of risk. If you would invest  2,475  in XAC Automation on December 29, 2024 and sell it today you would lose (55.00) from holding XAC Automation or give up 2.22% of portfolio value over 90 days.

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

XAC Automation  vs.  Kaulin Mfg

XAC Automation

Risk-Adjusted Performance

Very Weak

Over the last 90 days XAC Automation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, XAC Automation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kaulin Mfg

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaulin Mfg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kaulin Mfg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with XAC Automation and Kaulin Mfg

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

The idea behind XAC Automation and Kaulin Mfg 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.