Correlation Between Kap Industrial and FNB ETN

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

Diversification Opportunities for Kap Industrial and FNB ETN

-0.37

Correlation Coefficient

Kap Industrial  FNB ETN

Very good diversification

The 3 months correlation between Kap and FNB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and FNB ETN JPMORGQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB ETN JPMORGQ 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 FNB ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB ETN JPMORGQ has no effect on the direction of Kap Industrial i.e., Kap Industrial and FNB ETN go up and down completely randomly.

Pair Corralation between Kap Industrial and FNB ETN

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the FNB ETN. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 1.13 times less risky than FNB ETN. The stock trades about -0.03 of its potential returns per unit of risk. The FNB ETN JPMORGQ is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  217,100  in FNB ETN JPMORGQ on September 13, 2024 and sell it today you would earn a total of  39,500  from holding FNB ETN JPMORGQ or generate 18.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Kap Industrial Holdings  vs.  FNB ETN JPMORGQ

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 rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FNB ETN JPMORGQ

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FNB ETN JPMORGQ are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNB ETN sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and FNB ETN

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

The idea behind Kap Industrial Holdings and FNB ETN JPMORGQ 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.