Correlation Between Kap Industrial and E Media

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

Diversification Opportunities for Kap Industrial and E Media

0.26

Correlation Coefficient

Kap Industrial  E Media

Modest diversification

The 3 months correlation between Kap and EMH is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media Holdings 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 E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of Kap Industrial i.e., Kap Industrial and E Media go up and down completely randomly.

Pair Corralation between Kap Industrial and E Media

Assuming the 90 days trading horizon Kap Industrial is expected to generate 1.35 times less return on investment than E Media. But when comparing it to its historical volatility, Kap Industrial Holdings is 1.3 times less risky than E Media. It trades about 0.03 of its potential returns per unit of risk. E Media Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  31,000  in E Media Holdings on October 26, 2024 and sell it today you would earn a total of  5,000  from holding E Media Holdings or generate 16.13% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  E Media Holdings

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

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 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, E Media 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 E Media

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

The idea behind Kap Industrial Holdings and E Media Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.