Correlation Between Kinea Indices and Kinea II

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

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

Diversification Opportunities for Kinea Indices and Kinea II

0.45

Correlation Coefficient

Kinea Indices  Kinea II

Very weak diversification

The 3 months correlation between Kinea and Kinea is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kinea Indices Precos and Kinea II Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinea II Real and Kinea Indices 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 Kinea Indices Precos are associated (or correlated) with Kinea II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinea II Real has no effect on the direction of Kinea Indices i.e., Kinea Indices and Kinea II go up and down completely randomly.

Pair Corralation between Kinea Indices and Kinea II

Assuming the 90 days trading horizon Kinea Indices Precos is expected to generate 0.13 times more return on investment than Kinea II. However, Kinea Indices Precos is 7.99 times less risky than Kinea II. It trades about 0.02 of its potential returns per unit of risk. Kinea II Real is currently generating about 0.0 per unit of risk. If you would invest  8,659  in Kinea Indices Precos on December 4, 2024 and sell it today you would earn a total of  76.00  from holding Kinea Indices Precos or generate 0.88% return on investment over 90 days.

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

Kinea Indices Precos  vs.  Kinea II Real

Kinea Indices Precos

Risk-Adjusted Performance

Weak

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

Kinea II Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinea II Real has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Kinea II is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinea Indices and Kinea II

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

The idea behind Kinea Indices Precos and Kinea II Real 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.