Correlation Between Kap Industrial and Satrix MSCI

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

Diversification Opportunities for Kap Industrial and Satrix MSCI

0.38

Correlation Coefficient

Kap Industrial  Satrix MSCI

Weak diversification

The 3 months correlation between Kap and Satrix is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Satrix MSCI EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix MSCI EM 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 Satrix MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix MSCI EM has no effect on the direction of Kap Industrial i.e., Kap Industrial and Satrix MSCI go up and down completely randomly.

Pair Corralation between Kap Industrial and Satrix MSCI

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the Satrix MSCI. In addition to that, Kap Industrial is 1.8 times more volatile than Satrix MSCI EM. It trades about -0.04 of its total potential returns per unit of risk. Satrix MSCI EM is currently generating about 0.05 per unit of volatility. If you would invest  508,500  in Satrix MSCI EM on September 16, 2024 and sell it today you would earn a total of  15,400  from holding Satrix MSCI EM or generate 3.03% return on investment over 90 days.

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

Kap Industrial Holdings  vs.  Satrix MSCI EM

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.

Satrix MSCI EM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Satrix MSCI EM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Satrix MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kap Industrial and Satrix MSCI

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

The idea behind Kap Industrial Holdings and Satrix MSCI EM 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.