Correlation Between Alexander Forbes and Kap Industrial

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

By analyzing existing cross correlation between Alexander Forbes Grp and Kap Industrial Holdings, you can compare the effects of market volatilities on Alexander Forbes and Kap Industrial 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 Alexander Forbes with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alexander Forbes and Kap Industrial.

Diversification Opportunities for Alexander Forbes and Kap Industrial

0.35

Correlation Coefficient

Alexander Forbes  Kap Industrial

Weak diversification

The 3 months correlation between Alexander and Kap is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alexander Forbes Grp and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and Alexander Forbes 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 Alexander Forbes Grp are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of Alexander Forbes i.e., Alexander Forbes and Kap Industrial go up and down completely randomly.

Pair Corralation between Alexander Forbes and Kap Industrial

Assuming the 90 days trading horizon Alexander Forbes Grp is expected to generate 0.85 times more return on investment than Kap Industrial. However, Alexander Forbes Grp is 1.18 times less risky than Kap Industrial. It trades about 0.02 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about -0.06 per unit of risk. If you would invest  81,400  in Alexander Forbes Grp on December 21, 2024 and sell it today you would earn a total of  400.00  from holding Alexander Forbes Grp or generate 0.49% return on investment over 90 days.

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

Alexander Forbes Grp  vs.  Kap Industrial Holdings

Alexander Forbes Grp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alexander Forbes Grp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Alexander Forbes is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Alexander Forbes and Kap Industrial

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

The idea behind Alexander Forbes Grp and Kap Industrial Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.