Correlation Between Kemper and Lemonade

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

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

Diversification Opportunities for Kemper and Lemonade

-0.05

Correlation Coefficient

Kemper  Lemonade

Good diversification

The 3 months correlation between Kemper and Lemonade is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kemper and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade and Kemper 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 Kemper are associated (or correlated) with Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Kemper i.e., Kemper and Lemonade go up and down completely randomly.

Pair Corralation between Kemper and Lemonade

Given the investment horizon of 90 days Kemper is expected to generate 0.32 times more return on investment than Lemonade. However, Kemper is 3.14 times less risky than Lemonade. It trades about 0.03 of its potential returns per unit of risk. Lemonade is currently generating about -0.02 per unit of risk. If you would invest  6,562  in Kemper on December 29, 2024 and sell it today you would earn a total of  139.00  from holding Kemper or generate 2.12% return on investment over 90 days.

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

Kemper  vs.  Lemonade

Kemper

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Kemper is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Lemonade

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kemper and Lemonade

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

The idea behind Kemper and Lemonade 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.