Correlation Between AKD Hospitality and KSB Pumps

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

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

Diversification Opportunities for AKD Hospitality and KSB Pumps

0.02

Correlation Coefficient

AKD Hospitality  KSB Pumps

Significant diversification

The 3 months correlation between AKD and KSB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding AKD Hospitality and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps and AKD Hospitality 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 AKD Hospitality are associated (or correlated) with KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of AKD Hospitality i.e., AKD Hospitality and KSB Pumps go up and down completely randomly.

Pair Corralation between AKD Hospitality and KSB Pumps

Assuming the 90 days trading horizon AKD Hospitality is expected to generate 19.45 times less return on investment than KSB Pumps. But when comparing it to its historical volatility, AKD Hospitality is 1.01 times less risky than KSB Pumps. It trades about 0.0 of its potential returns per unit of risk. KSB Pumps is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  14,438  in KSB Pumps on December 2, 2024 and sell it today you would earn a total of  646.00  from holding KSB Pumps or generate 4.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

AKD Hospitality  vs.  KSB Pumps

AKD Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days AKD Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, AKD Hospitality is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

KSB Pumps

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AKD Hospitality and KSB Pumps

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

The idea behind AKD Hospitality and KSB Pumps 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.