Correlation Between Key Tronic and CSP

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

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

Diversification Opportunities for Key Tronic and CSP

-0.63

Correlation Coefficient

Key Tronic  CSP

Excellent diversification

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

Pair Corralation between Key Tronic and CSP

Given the investment horizon of 90 days Key Tronic is expected to under-perform the CSP. But the stock apears to be less risky and, when comparing its historical volatility, Key Tronic is 2.19 times less risky than CSP. The stock trades about -0.24 of its potential returns per unit of risk. The CSP Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,298  in CSP Inc on October 24, 2024 and sell it today you would earn a total of  416.00  from holding CSP Inc or generate 32.05% return on investment over 90 days.

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

Key Tronic  vs.  CSP Inc

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CSP Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CSP demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Key Tronic and CSP

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

The idea behind Key Tronic and CSP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.