Correlation Between Kingspan Group and Draper Esprit

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

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

Diversification Opportunities for Kingspan Group and Draper Esprit

0.93

Correlation Coefficient

Kingspan Group  Draper Esprit

Almost no diversification

The 3 months correlation between Kingspan and Draper is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc and Draper Esprit plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draper Esprit plc and Kingspan Group 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 Kingspan Group plc are associated (or correlated) with Draper Esprit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draper Esprit plc has no effect on the direction of Kingspan Group i.e., Kingspan Group and Draper Esprit go up and down completely randomly.

Pair Corralation between Kingspan Group and Draper Esprit

Assuming the 90 days trading horizon Kingspan Group is expected to generate 2.06 times less return on investment than Draper Esprit. But when comparing it to its historical volatility, Kingspan Group plc is 1.46 times less risky than Draper Esprit. It trades about 0.02 of its potential returns per unit of risk. Draper Esprit plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  268.00  in Draper Esprit plc on October 27, 2024 and sell it today you would earn a total of  34.00  from holding Draper Esprit plc or generate 12.69% return on investment over 90 days.

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

Kingspan Group plc  vs.  Draper Esprit plc

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Draper Esprit plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Draper Esprit plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Kingspan Group and Draper Esprit

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

The idea behind Kingspan Group plc and Draper Esprit plc 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 Transaction History module to view history of all your transactions and understand their impact on performance.