Correlation Between Kip McGrath and Queste Communications

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

By analyzing existing cross correlation between Kip McGrath Education and Queste Communications, you can compare the effects of market volatilities on Kip McGrath and Queste Communications 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 Kip McGrath with a short position of Queste Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kip McGrath and Queste Communications.

Diversification Opportunities for Kip McGrath and Queste Communications

0.49

Correlation Coefficient

Kip McGrath  Queste Communications

Very weak diversification

The 3 months correlation between Kip and Queste is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Kip McGrath Education and Queste Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queste Communications and Kip McGrath 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 Kip McGrath Education are associated (or correlated) with Queste Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queste Communications has no effect on the direction of Kip McGrath i.e., Kip McGrath and Queste Communications go up and down completely randomly.

Pair Corralation between Kip McGrath and Queste Communications

Assuming the 90 days trading horizon Kip McGrath Education is expected to under-perform the Queste Communications. But the stock apears to be less risky and, when comparing its historical volatility, Kip McGrath Education is 1.14 times less risky than Queste Communications. The stock trades about -0.03 of its potential returns per unit of risk. The Queste Communications is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Queste Communications on December 29, 2024 and sell it today you would lose (0.10) from holding Queste Communications or give up 2.22% of portfolio value over 90 days.

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

Kip McGrath Education  vs.  Queste Communications

Kip McGrath Education

Risk-Adjusted Performance

Very Weak

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

Queste Communications

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kip McGrath and Queste Communications

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

The idea behind Kip McGrath Education and Queste Communications 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.