Correlation Between Kap Industrial and AfroCentric Investment

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

By analyzing existing cross correlation between Kap Industrial Holdings and AfroCentric Investment Corp, you can compare the effects of market volatilities on Kap Industrial and AfroCentric Investment 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 Kap Industrial with a short position of AfroCentric Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and AfroCentric Investment.

Diversification Opportunities for Kap Industrial and AfroCentric Investment

0.54

Correlation Coefficient

Kap Industrial  AfroCentric Investment

Very weak diversification

The 3 months correlation between Kap and AfroCentric is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and Kap Industrial 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 Kap Industrial Holdings are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of Kap Industrial i.e., Kap Industrial and AfroCentric Investment go up and down completely randomly.

Pair Corralation between Kap Industrial and AfroCentric Investment

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 0.67 times more return on investment than AfroCentric Investment. However, Kap Industrial Holdings is 1.5 times less risky than AfroCentric Investment. It trades about 0.14 of its potential returns per unit of risk. AfroCentric Investment Corp is currently generating about -0.19 per unit of risk. If you would invest  26,300  in Kap Industrial Holdings on December 4, 2024 and sell it today you would earn a total of  2,800  from holding Kap Industrial Holdings or generate 10.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Kap Industrial Holdings  vs.  AfroCentric Investment Corp

Kap Industrial Holdings

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

AfroCentric Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days AfroCentric Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kap Industrial and AfroCentric Investment

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

The idea behind Kap Industrial Holdings and AfroCentric Investment Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.