Correlation Between Kap Industrial and Safari Investments

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

Diversification Opportunities for Kap Industrial and Safari Investments

0.18

Correlation Coefficient

Kap Industrial  Safari Investments

Average diversification

The 3 months correlation between Kap and Safari is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Safari Investments RSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safari Investments RSA 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 Safari Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safari Investments RSA has no effect on the direction of Kap Industrial i.e., Kap Industrial and Safari Investments go up and down completely randomly.

Pair Corralation between Kap Industrial and Safari Investments

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Safari Investments. But the stock apears to be less risky and, when comparing its historical volatility, Kap Industrial Holdings is 1.1 times less risky than Safari Investments. The stock trades about -0.06 of its potential returns per unit of risk. The Safari Investments RSA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  67,500  in Safari Investments RSA on December 23, 2024 and sell it today you would lose (2,500) from holding Safari Investments RSA or give up 3.7% of portfolio value over 90 days.

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

Kap Industrial Holdings  vs.  Safari Investments RSA

Kap Industrial Holdings

Risk-Adjusted Performance

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.

Safari Investments RSA

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Kap Industrial Holdings and Safari Investments RSA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.