Correlation Between Kimball Electronics and Viavi Solutions

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

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

Diversification Opportunities for Kimball Electronics and Viavi Solutions

0.82

Correlation Coefficient

Kimball Electronics  Viavi Solutions

Very poor diversification

The 3 months correlation between Kimball and Viavi is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Viavi Solutions go up and down completely randomly.

Pair Corralation between Kimball Electronics and Viavi Solutions

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 10.11 times less return on investment than Viavi Solutions. In addition to that, Kimball Electronics is 1.22 times more volatile than Viavi Solutions. It trades about 0.01 of its total potential returns per unit of risk. Viavi Solutions is currently generating about 0.15 per unit of volatility. If you would invest  977.00  in Viavi Solutions on September 6, 2024 and sell it today you would earn a total of  62.00  from holding Viavi Solutions or generate 6.35% 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.  Viavi Solutions

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 unfluctuating technical and fundamental indicators, Kimball Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Viavi Solutions

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kimball Electronics and Viavi Solutions

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

The idea behind Kimball Electronics and Viavi Solutions 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.