Correlation Between K Bro and Information Services

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

By analyzing existing cross correlation between K Bro Linen and Information Services, you can compare the effects of market volatilities on K Bro and Information Services 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 K Bro with a short position of Information Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Bro and Information Services.

Diversification Opportunities for K Bro and Information Services

-0.63

Correlation Coefficient

K Bro  Information Services

Excellent diversification

The 3 months correlation between KBL and Information is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding K Bro Linen and Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services and K Bro 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 K Bro Linen are associated (or correlated) with Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of K Bro i.e., K Bro and Information Services go up and down completely randomly.

Pair Corralation between K Bro and Information Services

Assuming the 90 days trading horizon K Bro Linen is expected to generate 1.0 times more return on investment than Information Services. However, K Bro Linen is 1.0 times less risky than Information Services. It trades about 0.19 of its potential returns per unit of risk. Information Services is currently generating about -0.15 per unit of risk. If you would invest  3,688  in K Bro Linen on September 22, 2024 and sell it today you would earn a total of  162.00  from holding K Bro Linen or generate 4.39% return on investment over 90 days.

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

K Bro Linen  vs.  Information Services

K Bro Linen

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K Bro Linen are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, K Bro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Information Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with K Bro and Information Services

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

The idea behind K Bro Linen and Information Services 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.