Correlation Between KDA and Maxim Power

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

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

Diversification Opportunities for KDA and Maxim Power

-0.15

Correlation Coefficient

KDA  Maxim Power

Good diversification

The 3 months correlation between KDA and Maxim is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp and KDA 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 KDA Group are associated (or correlated) with Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of KDA i.e., KDA and Maxim Power go up and down completely randomly.

Pair Corralation between KDA and Maxim Power

Assuming the 90 days horizon KDA Group is expected to generate 1.82 times more return on investment than Maxim Power. However, KDA is 1.82 times more volatile than Maxim Power Corp. It trades about -0.03 of its potential returns per unit of risk. Maxim Power Corp is currently generating about -0.18 per unit of risk. If you would invest  29.00  in KDA Group on December 28, 2024 and sell it today you would lose (4.00) from holding KDA Group or give up 13.79% of portfolio value over 90 days.

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

KDA Group  vs.  Maxim Power Corp

KDA Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KDA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Maxim Power Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maxim Power Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with KDA and Maxim Power

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

The idea behind KDA Group and Maxim Power 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.