Correlation Between Kforce and Yokohama Rubber

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

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

Diversification Opportunities for Kforce and Yokohama Rubber

0.15

Correlation Coefficient

Kforce  Yokohama Rubber

Average diversification

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

Pair Corralation between Kforce and Yokohama Rubber

Assuming the 90 days horizon Kforce Inc is expected to under-perform the Yokohama Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Kforce Inc is 1.11 times less risky than Yokohama Rubber. The stock trades about -0.04 of its potential returns per unit of risk. The The Yokohama Rubber is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,900  in The Yokohama Rubber on September 29, 2024 and sell it today you would earn a total of  140.00  from holding The Yokohama Rubber or generate 7.37% return on investment over 90 days.

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

Kforce Inc  vs.  The Yokohama Rubber

Kforce Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kforce is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Yokohama Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kforce and Yokohama Rubber

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

The idea behind Kforce Inc and The Yokohama Rubber 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.