Correlation Between GrafTech International and Kimball Electronics

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

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

Diversification Opportunities for GrafTech International and Kimball Electronics

0.58

Correlation Coefficient

GrafTech International  Kimball Electronics

Very weak diversification

The 3 months correlation between GrafTech and Kimball is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics and GrafTech International 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 GrafTech International are associated (or correlated) with Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of GrafTech International i.e., GrafTech International and Kimball Electronics go up and down completely randomly.

Pair Corralation between GrafTech International and Kimball Electronics

Considering the 90-day investment horizon GrafTech International is expected to generate 2.88 times more return on investment than Kimball Electronics. However, GrafTech International is 2.88 times more volatile than Kimball Electronics. It trades about 0.32 of its potential returns per unit of risk. Kimball Electronics is currently generating about 0.07 per unit of risk. If you would invest  65.00  in GrafTech International on August 31, 2024 and sell it today you would earn a total of  138.00  from holding GrafTech International or generate 212.31% return on investment over 90 days.

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

GrafTech International  vs.  Kimball Electronics

GrafTech International

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

Kimball Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Kimball Electronics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GrafTech International and Kimball Electronics

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

The idea behind GrafTech International and Kimball Electronics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.