Correlation Between KSB Pumps and Grays Leasing

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

By analyzing existing cross correlation between KSB Pumps and Grays Leasing, you can compare the effects of market volatilities on KSB Pumps and Grays Leasing 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 KSB Pumps with a short position of Grays Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Grays Leasing.

Diversification Opportunities for KSB Pumps and Grays Leasing

-0.2

Correlation Coefficient

KSB Pumps  Grays Leasing

Good diversification

The 3 months correlation between KSB and Grays is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Grays Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grays Leasing and KSB Pumps 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 KSB Pumps are associated (or correlated) with Grays Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grays Leasing has no effect on the direction of KSB Pumps i.e., KSB Pumps and Grays Leasing go up and down completely randomly.

Pair Corralation between KSB Pumps and Grays Leasing

Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.55 times more return on investment than Grays Leasing. However, KSB Pumps is 1.81 times less risky than Grays Leasing. It trades about 0.06 of its potential returns per unit of risk. Grays Leasing is currently generating about -0.07 per unit of risk. If you would invest  15,054  in KSB Pumps on December 30, 2024 and sell it today you would earn a total of  914.00  from holding KSB Pumps or generate 6.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

KSB Pumps  vs.  Grays Leasing

KSB Pumps

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Grays Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grays Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KSB Pumps and Grays Leasing

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

The idea behind KSB Pumps and Grays Leasing 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.