Correlation Between Four Leaf and Kasten

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

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

Diversification Opportunities for Four Leaf and Kasten

0.44

Correlation Coefficient

Four Leaf  Kasten

Very weak diversification

The 3 months correlation between Four and Kasten is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and Kasten Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kasten Inc and Four Leaf 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 Four Leaf Acquisition are associated (or correlated) with Kasten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kasten Inc has no effect on the direction of Four Leaf i.e., Four Leaf and Kasten go up and down completely randomly.

Pair Corralation between Four Leaf and Kasten

Given the investment horizon of 90 days Four Leaf is expected to generate 75.41 times less return on investment than Kasten. But when comparing it to its historical volatility, Four Leaf Acquisition is 95.71 times less risky than Kasten. It trades about 0.12 of its potential returns per unit of risk. Kasten Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.60  in Kasten Inc on December 27, 2024 and sell it today you would lose (0.10) from holding Kasten Inc or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Four Leaf Acquisition  vs.  Kasten Inc

Four Leaf Acquisition

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kasten Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kasten Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kasten unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Four Leaf and Kasten

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

The idea behind Four Leaf Acquisition and Kasten Inc 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.