Correlation Between Kimball Electronics and Preformed Line

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

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

Diversification Opportunities for Kimball Electronics and Preformed Line

0.83

Correlation Coefficient

Kimball Electronics  Preformed Line

Very poor diversification

The 3 months correlation between Kimball and Preformed is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Preformed Line Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preformed Line Products 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 Preformed Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preformed Line Products has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Preformed Line go up and down completely randomly.

Pair Corralation between Kimball Electronics and Preformed Line

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 1.6 times less return on investment than Preformed Line. In addition to that, Kimball Electronics is 1.01 times more volatile than Preformed Line Products. It trades about 0.08 of its total potential returns per unit of risk. Preformed Line Products is currently generating about 0.13 per unit of volatility. If you would invest  11,531  in Preformed Line Products on September 2, 2024 and sell it today you would earn a total of  2,071  from holding Preformed Line Products or generate 17.96% return on investment over 90 days.

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

Kimball Electronics  vs.  Preformed Line Products

Kimball Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Kimball Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Preformed Line Products

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preformed Line Products are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Preformed Line exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kimball Electronics and Preformed Line

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

The idea behind Kimball Electronics and Preformed Line Products 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.