Correlation Between Active Health and Kasten

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

By analyzing existing cross correlation between Active Health Foods and Kasten Inc, you can compare the effects of market volatilities on Active Health and Kasten 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 Active Health with a short position of Kasten. Check out your portfolio center. Please also check ongoing floating volatility patterns of Active Health and Kasten.

Diversification Opportunities for Active Health and Kasten

0.07

Correlation Coefficient

Active Health  Kasten

Significant diversification

The 3 months correlation between Active and Kasten is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Active Health Foods and Kasten Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kasten Inc and Active Health 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 Active Health Foods are associated (or correlated) with Kasten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kasten Inc has no effect on the direction of Active Health i.e., Active Health and Kasten go up and down completely randomly.

Pair Corralation between Active Health and Kasten

Given the investment horizon of 90 days Active Health Foods is expected to under-perform the Kasten. In addition to that, Active Health is 1.02 times more volatile than Kasten Inc. It trades about -0.18 of its total potential returns per unit of risk. Kasten Inc is currently generating about 0.07 per unit of volatility. If you would invest  0.60  in Kasten Inc on September 5, 2024 and sell it today you would earn a total of  0.05  from holding Kasten Inc or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Active Health Foods  vs.  Kasten Inc

Active Health Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active Health Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kasten Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kasten Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kasten unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Active Health and Kasten

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

The idea behind Active Health Foods and Kasten 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.