Correlation Between Kingsway Financial and AutoCanada

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

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

Diversification Opportunities for Kingsway Financial and AutoCanada

0.28

Correlation Coefficient

Kingsway Financial  AutoCanada

Modest diversification

The 3 months correlation between Kingsway and AutoCanada is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kingsway Financial Services and AutoCanada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoCanada and Kingsway Financial 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 Kingsway Financial Services are associated (or correlated) with AutoCanada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoCanada has no effect on the direction of Kingsway Financial i.e., Kingsway Financial and AutoCanada go up and down completely randomly.

Pair Corralation between Kingsway Financial and AutoCanada

Considering the 90-day investment horizon Kingsway Financial Services is expected to under-perform the AutoCanada. But the stock apears to be less risky and, when comparing its historical volatility, Kingsway Financial Services is 1.38 times less risky than AutoCanada. The stock trades about -0.03 of its potential returns per unit of risk. The AutoCanada is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,187  in AutoCanada on December 30, 2024 and sell it today you would lose (52.00) from holding AutoCanada or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.32%
Values	Daily Returns

Kingsway Financial Services  vs.  AutoCanada

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AutoCanada

Risk-Adjusted Performance

Very Weak

Over the last 90 days AutoCanada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, AutoCanada is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kingsway Financial and AutoCanada

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

The idea behind Kingsway Financial Services and AutoCanada 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.