Correlation Between Kap Industrial and Truworths International

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

Diversification Opportunities for Kap Industrial and Truworths International

0.16

Correlation Coefficient

Kap Industrial  Truworths International

Average diversification

The 3 months correlation between Kap and Truworths is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings and Truworths International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truworths International 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 Truworths International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truworths International has no effect on the direction of Kap Industrial i.e., Kap Industrial and Truworths International go up and down completely randomly.

Pair Corralation between Kap Industrial and Truworths International

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 1.75 times more return on investment than Truworths International. However, Kap Industrial is 1.75 times more volatile than Truworths International. It trades about -0.06 of its potential returns per unit of risk. Truworths International is currently generating about -0.31 per unit of risk. If you would invest  30,100  in Kap Industrial Holdings on December 21, 2024 and sell it today you would lose (4,000) from holding Kap Industrial Holdings or give up 13.29% 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.  Truworths International

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.

Truworths International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truworths International 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kap Industrial and Truworths International

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

The idea behind Kap Industrial Holdings and Truworths International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.