Correlation Between Morguard Real and K-Bro Linen

Can any of the company-specific risk be diversified away by investing in both Morguard Real and K-Bro Linen 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 Morguard Real and K-Bro Linen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Morguard Real Estate and K Bro Linen, you can compare the effects of market volatilities on Morguard Real and K-Bro Linen 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 Morguard Real with a short position of K-Bro Linen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morguard Real and K-Bro Linen.

Diversification Opportunities for Morguard Real and K-Bro Linen

-0.2

Correlation Coefficient

Morguard Real  K-Bro Linen

Good diversification

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

Pair Corralation between Morguard Real and K-Bro Linen

Assuming the 90 days trading horizon Morguard Real Estate is expected to generate 0.64 times more return on investment than K-Bro Linen. However, Morguard Real Estate is 1.57 times less risky than K-Bro Linen. It trades about 0.01 of its potential returns per unit of risk. K Bro Linen is currently generating about -0.16 per unit of risk. If you would invest  548.00  in Morguard Real Estate on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Morguard Real Estate or generate 0.36% return on investment over 90 days.

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

Morguard Real Estate  vs.  K Bro Linen

Morguard Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Morguard Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

K Bro Linen

Risk-Adjusted Performance

Very Weak

Over the last 90 days K Bro Linen 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 essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Morguard Real and K-Bro Linen

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

The idea behind Morguard Real Estate and K Bro Linen 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.