Correlation Between Ferrari NV and Kali

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

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

Diversification Opportunities for Ferrari NV and Kali

0.15

Correlation Coefficient

Ferrari NV  Kali

Average diversification

The 3 months correlation between Ferrari and Kali is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Kali Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kali Inc and Ferrari NV 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 Ferrari NV are associated (or correlated) with Kali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kali Inc has no effect on the direction of Ferrari NV i.e., Ferrari NV and Kali go up and down completely randomly.

Pair Corralation between Ferrari NV and Kali

Given the investment horizon of 90 days Ferrari NV is expected to generate 721.15 times less return on investment than Kali. But when comparing it to its historical volatility, Ferrari NV is 63.35 times less risky than Kali. It trades about 0.01 of its potential returns per unit of risk. Kali Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Kali Inc on December 28, 2024 and sell it today you would lose (0.01) from holding Kali Inc or give up 50.0% of portfolio value over 90 days.

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

Ferrari NV  vs.  Kali Inc

Ferrari NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ferrari NV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Kali Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kali Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Kali showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ferrari NV and Kali

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

The idea behind Ferrari NV and Kali 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.