Correlation Between Kap Industrial and Investec

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

Diversification Opportunities for Kap Industrial and Investec

0.41

Correlation Coefficient

Kap Industrial  Investec

Very weak diversification

The 3 months correlation between Kap and Investec is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Kap Industrial i.e., Kap Industrial and Investec go up and down completely randomly.

Pair Corralation between Kap Industrial and Investec

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 1.83 times more return on investment than Investec. However, Kap Industrial is 1.83 times more volatile than Investec. It trades about 0.03 of its potential returns per unit of risk. Investec is currently generating about 0.02 per unit of risk. If you would invest  25,200  in Kap Industrial Holdings on October 9, 2024 and sell it today you would earn a total of  3,400  from holding Kap Industrial Holdings or generate 13.49% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  Investec

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.

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kap Industrial Holdings and Investec 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.