Correlation Between Kimberly Clark and Patria Investments

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

By analyzing existing cross correlation between Kimberly Clark and Patria Investments Limited, you can compare the effects of market volatilities on Kimberly Clark and Patria Investments 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 Kimberly Clark with a short position of Patria Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimberly Clark and Patria Investments.

Diversification Opportunities for Kimberly Clark and Patria Investments

0.62

Correlation Coefficient

Kimberly Clark  Patria Investments

Poor diversification

The 3 months correlation between Kimberly and Patria is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments and Kimberly Clark 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 Kimberly Clark are associated (or correlated) with Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Kimberly Clark i.e., Kimberly Clark and Patria Investments go up and down completely randomly.

Pair Corralation between Kimberly Clark and Patria Investments

Assuming the 90 days trading horizon Kimberly Clark is expected to under-perform the Patria Investments. But the stock apears to be less risky and, when comparing its historical volatility, Kimberly Clark is 1.01 times less risky than Patria Investments. The stock trades about -0.14 of its potential returns per unit of risk. The Patria Investments Limited is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,680  in Patria Investments Limited on October 10, 2024 and sell it today you would lose (112.00) from holding Patria Investments Limited or give up 3.04% of portfolio value over 90 days.

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

Kimberly Clark  vs.  Patria Investments Limited

Kimberly Clark

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Kimberly Clark is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Patria Investments

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kimberly Clark and Patria Investments

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

The idea behind Kimberly Clark and Patria Investments Limited 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.