Correlation Between Kaufman Et and CAC Consumer

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

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

Diversification Opportunities for Kaufman Et and CAC Consumer

0.01

Correlation Coefficient

Kaufman Et  CAC Consumer

Significant diversification

The 3 months correlation between Kaufman and CAC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kaufman Et Broad and CAC Consumer Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAC Consumer Goods and Kaufman Et 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 Kaufman Et Broad are associated (or correlated) with CAC Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAC Consumer Goods has no effect on the direction of Kaufman Et i.e., Kaufman Et and CAC Consumer go up and down completely randomly.

Pair Corralation between Kaufman Et and CAC Consumer

Assuming the 90 days trading horizon Kaufman Et is expected to generate 27.57 times less return on investment than CAC Consumer. In addition to that, Kaufman Et is 1.36 times more volatile than CAC Consumer Goods. It trades about 0.01 of its total potential returns per unit of risk. CAC Consumer Goods is currently generating about 0.26 per unit of volatility. If you would invest  467,774  in CAC Consumer Goods on September 27, 2024 and sell it today you would earn a total of  27,739  from holding CAC Consumer Goods or generate 5.93% return on investment over 90 days.

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

Kaufman Et Broad  vs.  CAC Consumer Goods

Pair Trading with Kaufman Et and CAC Consumer

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

The idea behind Kaufman Et Broad and CAC Consumer Goods 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.