Correlation Between Mueller Water and Kornit Digital

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

By analyzing existing cross correlation between Mueller Water Products and Kornit Digital, you can compare the effects of market volatilities on Mueller Water and Kornit Digital 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 Mueller Water with a short position of Kornit Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Water and Kornit Digital.

Diversification Opportunities for Mueller Water and Kornit Digital

0.68

Correlation Coefficient

Mueller Water  Kornit Digital

Poor diversification

The 3 months correlation between Mueller and Kornit is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Water Products and Kornit Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kornit Digital and Mueller Water 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 Mueller Water Products are associated (or correlated) with Kornit Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kornit Digital has no effect on the direction of Mueller Water i.e., Mueller Water and Kornit Digital go up and down completely randomly.

Pair Corralation between Mueller Water and Kornit Digital

Considering the 90-day investment horizon Mueller Water Products is expected to under-perform the Kornit Digital. But the stock apears to be less risky and, when comparing its historical volatility, Mueller Water Products is 1.94 times less risky than Kornit Digital. The stock trades about -0.01 of its potential returns per unit of risk. The Kornit Digital is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,423  in Kornit Digital on October 6, 2024 and sell it today you would earn a total of  650.00  from holding Kornit Digital or generate 26.83% return on investment over 90 days.

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

Mueller Water Products  vs.  Kornit Digital

Mueller Water Products

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kornit Digital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kornit Digital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kornit Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mueller Water and Kornit Digital

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

The idea behind Mueller Water Products and Kornit Digital 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.