Correlation Between Schroder European and Kap Industrial

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

By analyzing existing cross correlation between Schroder European Real and Kap Industrial Holdings, you can compare the effects of market volatilities on Schroder European and Kap Industrial 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 Schroder European with a short position of Kap Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schroder European and Kap Industrial.

Diversification Opportunities for Schroder European and Kap Industrial

-0.17

Correlation Coefficient

Schroder European  Kap Industrial

Good diversification

The 3 months correlation between Schroder and Kap is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Schroder European Real and Kap Industrial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kap Industrial Holdings and Schroder European 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 Schroder European Real are associated (or correlated) with Kap Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kap Industrial Holdings has no effect on the direction of Schroder European i.e., Schroder European and Kap Industrial go up and down completely randomly.

Pair Corralation between Schroder European and Kap Industrial

Assuming the 90 days trading horizon Schroder European Real is not expected to generate positive returns. However, Schroder European Real is 1197.52 times less risky than Kap Industrial. It waists most of its returns potential to compensate for thr risk taken. Kap Industrial is generating about -0.06 per unit of risk. If you would invest  199,400  in Schroder European Real on December 23, 2024 and sell it today you would earn a total of  0.00  from holding Schroder European Real or generate 0.0% return on investment over 90 days.

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

Schroder European Real  vs.  Kap Industrial Holdings

Schroder European Real

Risk-Adjusted Performance

Very Weak

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

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Schroder European and Kap Industrial

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

The idea behind Schroder European Real and Kap Industrial Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.