Correlation Between Kimball Electronics and EMCORE

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

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

Diversification Opportunities for Kimball Electronics and EMCORE

0.53

Correlation Coefficient

Kimball Electronics  EMCORE

Very weak diversification

The 3 months correlation between Kimball and EMCORE is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and EMCORE go up and down completely randomly.

Pair Corralation between Kimball Electronics and EMCORE

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 5.48 times less return on investment than EMCORE. But when comparing it to its historical volatility, Kimball Electronics is 2.11 times less risky than EMCORE. It trades about 0.08 of its potential returns per unit of risk. EMCORE is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  213.00  in EMCORE on September 25, 2024 and sell it today you would earn a total of  93.00  from holding EMCORE or generate 43.66% return on investment over 90 days.

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

Kimball Electronics  vs.  EMCORE

Kimball Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 3 (%) 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.

EMCORE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kimball Electronics and EMCORE

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

The idea behind Kimball Electronics and EMCORE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.