Correlation Between Cummins and Kornit Digital

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

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

Diversification Opportunities for Cummins and Kornit Digital

0.84

Correlation Coefficient

Cummins  Kornit Digital

Very poor diversification

The 3 months correlation between Cummins and Kornit is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Kornit Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kornit Digital and Cummins 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 Cummins are associated (or correlated) with Kornit Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kornit Digital has no effect on the direction of Cummins i.e., Cummins and Kornit Digital go up and down completely randomly.

Pair Corralation between Cummins and Kornit Digital

Considering the 90-day investment horizon Cummins is expected to generate 0.83 times more return on investment than Kornit Digital. However, Cummins is 1.21 times less risky than Kornit Digital. It trades about 0.26 of its potential returns per unit of risk. Kornit Digital is currently generating about -0.35 per unit of risk. If you would invest  35,113  in Cummins on October 22, 2024 and sell it today you would earn a total of  1,521  from holding Cummins or generate 4.33% return on investment over 90 days.

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

Cummins  vs.  Kornit Digital

Cummins

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, Cummins may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kornit Digital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kornit Digital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kornit Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cummins and Kornit Digital

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

The idea behind Cummins and Kornit Digital 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.