Correlation Between Kap Industrial and Ayo Technology

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

Diversification Opportunities for Kap Industrial and Ayo Technology

0.22

Correlation Coefficient

Kap Industrial  Ayo Technology

Modest diversification

The 3 months correlation between Kap and Ayo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Ayo Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayo Technology Solutions 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 Ayo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayo Technology Solutions has no effect on the direction of Kap Industrial i.e., Kap Industrial and Ayo Technology go up and down completely randomly.

Pair Corralation between Kap Industrial and Ayo Technology

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 0.58 times more return on investment than Ayo Technology. However, Kap Industrial Holdings is 1.73 times less risky than Ayo Technology. It trades about -0.06 of its potential returns per unit of risk. Ayo Technology Solutions is currently generating about -0.04 per unit of risk. If you would invest  30,100  in Kap Industrial Holdings on December 21, 2024 and sell it today you would lose (4,000) from holding Kap Industrial Holdings or give up 13.29% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Ayo Technology Solutions

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.

Ayo Technology Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayo Technology Solutions 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 Ayo Technology

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

The idea behind Kap Industrial Holdings and Ayo Technology Solutions 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.