Correlation Between Group 1 and Kingsway Financial

Can any of the company-specific risk be diversified away by investing in both Group 1 and Kingsway Financial 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 Group 1 and Kingsway Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 1 Automotive and Kingsway Financial Services, you can compare the effects of market volatilities on Group 1 and Kingsway Financial 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 Group 1 with a short position of Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Kingsway Financial.

Diversification Opportunities for Group 1 and Kingsway Financial

0.1

Correlation Coefficient

Group 1  Kingsway Financial

Average diversification

The 3 months correlation between Group and Kingsway is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial and Group 1 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 Group 1 Automotive are associated (or correlated) with Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Group 1 i.e., Group 1 and Kingsway Financial go up and down completely randomly.

Pair Corralation between Group 1 and Kingsway Financial

Considering the 90-day investment horizon Group 1 Automotive is expected to under-perform the Kingsway Financial. In addition to that, Group 1 is 1.09 times more volatile than Kingsway Financial Services. It trades about -0.07 of its total potential returns per unit of risk. Kingsway Financial Services is currently generating about -0.03 per unit of volatility. If you would invest  846.00  in Kingsway Financial Services on December 28, 2024 and sell it today you would lose (41.00) from holding Kingsway Financial Services or give up 4.85% of portfolio value over 90 days.

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

Group 1 Automotive  vs.  Kingsway Financial Services

Group 1 Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group 1 Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Group 1 and Kingsway Financial

The main advantage of trading using opposite Group 1 and Kingsway Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Kingsway Financial 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 Kingsway Financial will offset losses from the drop in Kingsway Financial's long position.

The idea behind Group 1 Automotive and Kingsway Financial Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.