Correlation Between Kendrion and Aalberts Industries

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

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

Diversification Opportunities for Kendrion and Aalberts Industries

0.69

Correlation Coefficient

Kendrion  Aalberts Industries

Poor diversification

The 3 months correlation between Kendrion and Aalberts is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kendrion NV and Aalberts Industries NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aalberts Industries and Kendrion 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 Kendrion NV are associated (or correlated) with Aalberts Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aalberts Industries has no effect on the direction of Kendrion i.e., Kendrion and Aalberts Industries go up and down completely randomly.

Pair Corralation between Kendrion and Aalberts Industries

Assuming the 90 days trading horizon Kendrion NV is expected to generate 0.7 times more return on investment than Aalberts Industries. However, Kendrion NV is 1.44 times less risky than Aalberts Industries. It trades about -0.07 of its potential returns per unit of risk. Aalberts Industries NV is currently generating about -0.14 per unit of risk. If you would invest  1,010  in Kendrion NV on December 5, 2024 and sell it today you would lose (33.00) from holding Kendrion NV or give up 3.27% of portfolio value over 90 days.

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

Kendrion NV  vs.  Aalberts Industries NV

Kendrion NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kendrion NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Aalberts Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aalberts Industries NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Kendrion and Aalberts Industries

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

The idea behind Kendrion NV and Aalberts Industries NV 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.