Correlation Between Kimball Electronics and Encore Wire

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

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

Diversification Opportunities for Kimball Electronics and Encore Wire

0.55

Correlation Coefficient

Kimball Electronics  Encore Wire

Very weak diversification

The 3 months correlation between Kimball and Encore is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Encore Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Wire 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 Encore Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Wire has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Encore Wire go up and down completely randomly.

Pair Corralation between Kimball Electronics and Encore Wire

If you would invest  1,800  in Kimball Electronics on September 4, 2024 and sell it today you would earn a total of  227.00  from holding Kimball Electronics or generate 12.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Kimball Electronics  vs.  Encore Wire

Kimball Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Kimball Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Encore Wire

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encore Wire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Encore Wire is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kimball Electronics and Encore Wire

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

The idea behind Kimball Electronics and Encore Wire 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.