Correlation Between Kimball Electronics and Clearfield

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

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

Diversification Opportunities for Kimball Electronics and Clearfield

-0.54

Correlation Coefficient

Kimball Electronics  Clearfield

Excellent diversification

The 3 months correlation between Kimball and Clearfield is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield and Kimball Electronics 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 Kimball Electronics are associated (or correlated) with Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Clearfield go up and down completely randomly.

Pair Corralation between Kimball Electronics and Clearfield

Allowing for the 90-day total investment horizon Kimball Electronics is expected to under-perform the Clearfield. But the stock apears to be less risky and, when comparing its historical volatility, Kimball Electronics is 1.63 times less risky than Clearfield. The stock trades about -0.12 of its potential returns per unit of risk. The Clearfield is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,060  in Clearfield on September 25, 2024 and sell it today you would earn a total of  73.00  from holding Clearfield or generate 2.39% return on investment over 90 days.

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

Kimball Electronics  vs.  Clearfield

Kimball Electronics

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Kimball Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clearfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearfield 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kimball Electronics and Clearfield

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

The idea behind Kimball Electronics and Clearfield 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.