Correlation Between National Presto and KWESST Micro

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

By analyzing existing cross correlation between National Presto Industries and KWESST Micro Systems, you can compare the effects of market volatilities on National Presto and KWESST Micro 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 National Presto with a short position of KWESST Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Presto and KWESST Micro.

Diversification Opportunities for National Presto and KWESST Micro

0.48

Correlation Coefficient

National Presto  KWESST Micro

Very weak diversification

The 3 months correlation between National and KWESST is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Presto Industries and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems and National Presto 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 National Presto Industries are associated (or correlated) with KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of National Presto i.e., National Presto and KWESST Micro go up and down completely randomly.

Pair Corralation between National Presto and KWESST Micro

Considering the 90-day investment horizon National Presto Industries is expected to generate 0.14 times more return on investment than KWESST Micro. However, National Presto Industries is 6.98 times less risky than KWESST Micro. It trades about -0.08 of its potential returns per unit of risk. KWESST Micro Systems is currently generating about -0.09 per unit of risk. If you would invest  9,640  in National Presto Industries on December 28, 2024 and sell it today you would lose (740.00) from holding National Presto Industries or give up 7.68% of portfolio value over 90 days.

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

National Presto Industries  vs.  KWESST Micro Systems

National Presto Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Presto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

KWESST Micro Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days KWESST Micro Systems 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with National Presto and KWESST Micro

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

The idea behind National Presto Industries and KWESST Micro Systems 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.