Correlation Between Kaival Brands and RLX Technology

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

By analyzing existing cross correlation between Kaival Brands Innovations and RLX Technology, you can compare the effects of market volatilities on Kaival Brands and RLX Technology 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 Kaival Brands with a short position of RLX Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaival Brands and RLX Technology.

Diversification Opportunities for Kaival Brands and RLX Technology

0.73

Correlation Coefficient

Kaival Brands  RLX Technology

Poor diversification

The 3 months correlation between Kaival and RLX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kaival Brands Innovations and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology and Kaival Brands 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 Kaival Brands Innovations are associated (or correlated) with RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of Kaival Brands i.e., Kaival Brands and RLX Technology go up and down completely randomly.

Pair Corralation between Kaival Brands and RLX Technology

Given the investment horizon of 90 days Kaival Brands Innovations is expected to generate 3.51 times more return on investment than RLX Technology. However, Kaival Brands is 3.51 times more volatile than RLX Technology. It trades about 0.07 of its potential returns per unit of risk. RLX Technology is currently generating about 0.11 per unit of risk. If you would invest  72.00  in Kaival Brands Innovations on November 28, 2024 and sell it today you would earn a total of  12.00  from holding Kaival Brands Innovations or generate 16.67% return on investment over 90 days.

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

Kaival Brands Innovations  vs.  RLX Technology

Kaival Brands Innovations

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kaival Brands Innovations are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Kaival Brands disclosed solid returns over the last few months and may actually be approaching a breakup point.

RLX Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaival Brands and RLX Technology

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

The idea behind Kaival Brands Innovations and RLX Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.