Correlation Between Garmin and Kulicke

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

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

Diversification Opportunities for Garmin and Kulicke

0.82

Correlation Coefficient

Garmin  Kulicke

Very poor diversification

The 3 months correlation between Garmin and Kulicke is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Kulicke and Soffa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kulicke and Soffa and Garmin 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 Garmin are associated (or correlated) with Kulicke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kulicke and Soffa has no effect on the direction of Garmin i.e., Garmin and Kulicke go up and down completely randomly.

Pair Corralation between Garmin and Kulicke

Given the investment horizon of 90 days Garmin is expected to under-perform the Kulicke. But the stock apears to be less risky and, when comparing its historical volatility, Garmin is 1.67 times less risky than Kulicke. The stock trades about -0.24 of its potential returns per unit of risk. The Kulicke and Soffa is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,823  in Kulicke and Soffa on October 7, 2024 and sell it today you would lose (91.00) from holding Kulicke and Soffa or give up 1.89% of portfolio value over 90 days.

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

Garmin  vs.  Kulicke and Soffa

Garmin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

Kulicke and Soffa

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kulicke and Soffa are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Kulicke may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Garmin and Kulicke

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

The idea behind Garmin and Kulicke and Soffa 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.