Correlation Between KDA and Quipt Home

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

By analyzing existing cross correlation between KDA Group and Quipt Home Medical, you can compare the effects of market volatilities on KDA and Quipt Home 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 Quipt Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of KDA and Quipt Home.

Diversification Opportunities for KDA and Quipt Home

-0.37

Correlation Coefficient

KDA  Quipt Home

Very good diversification

The 3 months correlation between KDA and Quipt is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Quipt Home Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quipt Home Medical 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 Quipt Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quipt Home Medical has no effect on the direction of KDA i.e., KDA and Quipt Home go up and down completely randomly.

Pair Corralation between KDA and Quipt Home

Assuming the 90 days horizon KDA Group is expected to generate 1.25 times more return on investment than Quipt Home. However, KDA is 1.25 times more volatile than Quipt Home Medical. It trades about -0.02 of its potential returns per unit of risk. Quipt Home Medical is currently generating about -0.04 per unit of risk. If you would invest  28.00  in KDA Group on December 25, 2024 and sell it today you would lose (3.00) from holding KDA Group or give up 10.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

KDA Group  vs.  Quipt Home Medical

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 fairly stable basic indicators, KDA is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Quipt Home Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quipt Home Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic 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 KDA and Quipt Home

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

The idea behind KDA Group and Quipt Home Medical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.