Correlation Between Key Tronic and Pure Storage

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

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

Diversification Opportunities for Key Tronic and Pure Storage

-0.78

Correlation Coefficient

Key Tronic  Pure Storage

Pay attention - limited upside

The 3 months correlation between Key and Pure is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Key Tronic i.e., Key Tronic and Pure Storage go up and down completely randomly.

Pair Corralation between Key Tronic and Pure Storage

Given the investment horizon of 90 days Key Tronic is expected to generate 0.74 times more return on investment than Pure Storage. However, Key Tronic is 1.35 times less risky than Pure Storage. It trades about 0.03 of its potential returns per unit of risk. Pure Storage is currently generating about 0.01 per unit of risk. If you would invest  388.00  in Key Tronic on September 29, 2024 and sell it today you would earn a total of  21.00  from holding Key Tronic or generate 5.41% 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.  Pure Storage

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 uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pure Storage

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Key Tronic and Pure Storage

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

The idea behind Key Tronic and Pure Storage 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.