Correlation Between Kyndryl Holdings and Monolithic Power

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

By analyzing existing cross correlation between Kyndryl Holdings and Monolithic Power Systems, you can compare the effects of market volatilities on Kyndryl Holdings and Monolithic Power 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 Kyndryl Holdings with a short position of Monolithic Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kyndryl Holdings and Monolithic Power.

Diversification Opportunities for Kyndryl Holdings and Monolithic Power

0.76

Correlation Coefficient

Kyndryl Holdings  Monolithic Power

Poor diversification

The 3 months correlation between Kyndryl and Monolithic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kyndryl Holdings and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems and Kyndryl Holdings 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 Kyndryl Holdings are associated (or correlated) with Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Kyndryl Holdings i.e., Kyndryl Holdings and Monolithic Power go up and down completely randomly.

Pair Corralation between Kyndryl Holdings and Monolithic Power

Allowing for the 90-day total investment horizon Kyndryl Holdings is expected to under-perform the Monolithic Power. But the stock apears to be less risky and, when comparing its historical volatility, Kyndryl Holdings is 1.43 times less risky than Monolithic Power. The stock trades about -0.05 of its potential returns per unit of risk. The Monolithic Power Systems is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  60,240  in Monolithic Power Systems on December 30, 2024 and sell it today you would lose (2,251) from holding Monolithic Power Systems or give up 3.74% of portfolio value over 90 days.

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

Kyndryl Holdings  vs.  Monolithic Power Systems

Kyndryl Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kyndryl Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Monolithic Power Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Monolithic Power is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kyndryl Holdings and Monolithic Power

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

The idea behind Kyndryl Holdings and Monolithic Power Systems 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.