Correlation Between Kinsale Capital and Valhi

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

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

Diversification Opportunities for Kinsale Capital and Valhi

-0.63

Correlation Coefficient

Kinsale Capital  Valhi

Excellent diversification

The 3 months correlation between Kinsale and Valhi is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kinsale Capital Group and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc and Kinsale Capital 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 Kinsale Capital Group are associated (or correlated) with Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of Kinsale Capital i.e., Kinsale Capital and Valhi go up and down completely randomly.

Pair Corralation between Kinsale Capital and Valhi

Given the investment horizon of 90 days Kinsale Capital Group is expected to generate 0.44 times more return on investment than Valhi. However, Kinsale Capital Group is 2.27 times less risky than Valhi. It trades about 0.05 of its potential returns per unit of risk. Valhi Inc is currently generating about -0.12 per unit of risk. If you would invest  44,971  in Kinsale Capital Group on September 26, 2024 and sell it today you would earn a total of  2,124  from holding Kinsale Capital Group or generate 4.72% return on investment over 90 days.

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

Kinsale Capital Group  vs.  Valhi Inc

Kinsale Capital Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kinsale Capital Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Kinsale Capital is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Valhi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Kinsale Capital and Valhi

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

The idea behind Kinsale Capital Group and Valhi Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.