Correlation Between Kap Industrial and Advtech

Can any of the company-specific risk be diversified away by investing in both Kap Industrial and Advtech 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 Advtech 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 Advtech, you can compare the effects of market volatilities on Kap Industrial and Advtech 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 Advtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and Advtech.

Diversification Opportunities for Kap Industrial and Advtech

0.12

Correlation Coefficient

Kap Industrial  Advtech

Average diversification

The 3 months correlation between Kap and Advtech is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech 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 Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Kap Industrial i.e., Kap Industrial and Advtech go up and down completely randomly.

Pair Corralation between Kap Industrial and Advtech

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Advtech. In addition to that, Kap Industrial is 2.04 times more volatile than Advtech. It trades about -0.05 of its total potential returns per unit of risk. Advtech is currently generating about 0.0 per unit of volatility. If you would invest  327,500  in Advtech on December 30, 2024 and sell it today you would lose (3,200) from holding Advtech or give up 0.98% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Advtech

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.

Advtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kap Industrial and Advtech

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

The idea behind Kap Industrial Holdings and Advtech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.