Correlation Between Kensington Defender and Huber Capital

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

By analyzing existing cross correlation between Kensington Defender Institutional and Huber Capital Equity, you can compare the effects of market volatilities on Kensington Defender and Huber Capital 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 Kensington Defender with a short position of Huber Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Defender and Huber Capital.

Diversification Opportunities for Kensington Defender and Huber Capital

0.53

Correlation Coefficient

Kensington Defender  Huber Capital

Very weak diversification

The 3 months correlation between Kensington and Huber is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Defender Institutio and Huber Capital Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huber Capital Equity and Kensington Defender 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 Kensington Defender Institutional are associated (or correlated) with Huber Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huber Capital Equity has no effect on the direction of Kensington Defender i.e., Kensington Defender and Huber Capital go up and down completely randomly.

Pair Corralation between Kensington Defender and Huber Capital

Assuming the 90 days horizon Kensington Defender is expected to generate 3.19 times less return on investment than Huber Capital. But when comparing it to its historical volatility, Kensington Defender Institutional is 1.44 times less risky than Huber Capital. It trades about 0.04 of its potential returns per unit of risk. Huber Capital Equity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Huber Capital Equity on September 23, 2024 and sell it today you would earn a total of  892.00  from holding Huber Capital Equity or generate 37.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	79.48%
Values	Daily Returns

Kensington Defender Institutio  vs.  Huber Capital Equity

Kensington Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kensington Defender Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Kensington Defender is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huber Capital Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huber Capital Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Huber Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kensington Defender and Huber Capital

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

The idea behind Kensington Defender Institutional and Huber Capital Equity 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.