Correlation Between AfricaRhodium ETF and Kap Industrial

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Can any of the company-specific risk be diversified away by investing in both AfricaRhodium ETF and Kap Industrial 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 AfricaRhodium ETF and Kap Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AfricaRhodium ETF and Kap Industrial Holdings, you can compare the effects of market volatilities on AfricaRhodium ETF and Kap Industrial 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 AfricaRhodium ETF with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AfricaRhodium ETF and Kap Industrial.

Diversification Opportunities for AfricaRhodium ETF and Kap Industrial

AfricaRhodiumKapDiversified AwayAfricaRhodiumKapDiversified Away100%
0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between AfricaRhodium and Kap is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AfricaRhodium ETF and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and AfricaRhodium ETF 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 AfricaRhodium ETF are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of AfricaRhodium ETF i.e., AfricaRhodium ETF and Kap Industrial go up and down completely randomly.

Pair Corralation between AfricaRhodium ETF and Kap Industrial

Assuming the 90 days trading horizon AfricaRhodium ETF is expected to generate 1.85 times more return on investment than Kap Industrial. However, AfricaRhodium ETF is 1.85 times more volatile than Kap Industrial Holdings. It trades about -0.02 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about -0.04 per unit of risk. If you would invest  7,925,300  in AfricaRhodium ETF on September 14, 2024 and sell it today you would lose (475,000) from holding AfricaRhodium ETF or give up 5.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AfricaRhodium ETF  vs.  Kap Industrial Holdings

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -5051015
JavaScript chart by amCharts 3.21.15ETFRHO KAP
       Timeline  
AfricaRhodium ETF 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AfricaRhodium ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec75,00080,00085,00090,000
Kap Industrial Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec310315320325330335340345

AfricaRhodium ETF and Kap Industrial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.96-3.72-2.47-1.23-0.021.222.463.694.93 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15ETFRHO KAP
       Returns  

Pair Trading with AfricaRhodium ETF and Kap Industrial

The main advantage of trading using opposite AfricaRhodium ETF and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfricaRhodium ETF position performs unexpectedly, Kap Industrial 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 Kap Industrial will offset losses from the drop in Kap Industrial's long position.
The idea behind AfricaRhodium ETF and Kap Industrial Holdings 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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