Correlation Between Kap Industrial and Omnia Holdings

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

Diversification Opportunities for Kap Industrial and Omnia Holdings

-0.66

Correlation Coefficient

Kap Industrial  Omnia Holdings

Excellent diversification

The 3 months correlation between Kap and Omnia is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Omnia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnia 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 Omnia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnia Holdings has no effect on the direction of Kap Industrial i.e., Kap Industrial and Omnia Holdings go up and down completely randomly.

Pair Corralation between Kap Industrial and Omnia Holdings

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Omnia Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 1.2 times less risky than Omnia Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Omnia Holdings Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  737,500  in Omnia Holdings Limited on September 26, 2024 and sell it today you would lose (6,000) from holding Omnia Holdings Limited or give up 0.81% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Omnia Holdings Limited

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 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.

Omnia Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Omnia Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Omnia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and Omnia Holdings

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

The idea behind Kap Industrial Holdings and Omnia Holdings Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.