Correlation Between Kap Industrial and Libstar Holdings

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

Diversification Opportunities for Kap Industrial and Libstar Holdings

-0.09

Correlation Coefficient

Kap Industrial  Libstar Holdings

Good diversification

The 3 months correlation between Kap and Libstar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Libstar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Libstar 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 Libstar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Libstar Holdings has no effect on the direction of Kap Industrial i.e., Kap Industrial and Libstar Holdings go up and down completely randomly.

Pair Corralation between Kap Industrial and Libstar Holdings

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Libstar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 1.51 times less risky than Libstar Holdings. The stock trades about -0.18 of its potential returns per unit of risk. The Libstar Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  43,300  in Libstar Holdings on October 7, 2024 and sell it today you would lose (2,200) from holding Libstar Holdings or give up 5.08% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Libstar 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.

Libstar Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kap Industrial Holdings and Libstar 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.