Correlation Between Kerry Group and Kikkoman Corp

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

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

Diversification Opportunities for Kerry Group and Kikkoman Corp

0.71

Correlation Coefficient

Kerry Group  Kikkoman Corp

Poor diversification

The 3 months correlation between Kerry and Kikkoman is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kerry Group PLC and Kikkoman Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kikkoman Corp ADR and Kerry 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 Kerry Group PLC are associated (or correlated) with Kikkoman Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kikkoman Corp ADR has no effect on the direction of Kerry Group i.e., Kerry Group and Kikkoman Corp go up and down completely randomly.

Pair Corralation between Kerry Group and Kikkoman Corp

Assuming the 90 days horizon Kerry Group is expected to generate 10.48 times less return on investment than Kikkoman Corp. But when comparing it to its historical volatility, Kerry Group PLC is 5.18 times less risky than Kikkoman Corp. It trades about 0.01 of its potential returns per unit of risk. Kikkoman Corp ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,733  in Kikkoman Corp ADR on October 11, 2024 and sell it today you would lose (583.00) from holding Kikkoman Corp ADR or give up 21.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.67%
Values	Daily Returns

Kerry Group PLC  vs.  Kikkoman Corp ADR

Kerry Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kerry Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kerry Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kikkoman Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kikkoman Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kikkoman Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kerry Group and Kikkoman Corp

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

The idea behind Kerry Group PLC and Kikkoman Corp ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.