Correlation Between Kasten and Gemz Corp

Can any of the company-specific risk be diversified away by investing in both Kasten and Gemz Corp 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 Kasten and Gemz Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kasten Inc and Gemz Corp, you can compare the effects of market volatilities on Kasten and Gemz Corp 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 Kasten with a short position of Gemz Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kasten and Gemz Corp.

Diversification Opportunities for Kasten and Gemz Corp

-0.24

Correlation Coefficient

Kasten  Gemz Corp

Very good diversification

The 3 months correlation between Kasten and Gemz is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kasten Inc and Gemz Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemz Corp and Kasten 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 Kasten Inc are associated (or correlated) with Gemz Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemz Corp has no effect on the direction of Kasten i.e., Kasten and Gemz Corp go up and down completely randomly.

Pair Corralation between Kasten and Gemz Corp

Given the investment horizon of 90 days Kasten is expected to generate 1.24 times less return on investment than Gemz Corp. But when comparing it to its historical volatility, Kasten Inc is 1.28 times less risky than Gemz Corp. It trades about 0.09 of its potential returns per unit of risk. Gemz Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Gemz Corp on December 26, 2024 and sell it today you would lose (0.02) from holding Gemz Corp or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Kasten Inc  vs.  Gemz Corp

Kasten Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kasten Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kasten unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gemz Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kasten and Gemz Corp

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

The idea behind Kasten Inc and Gemz Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.