Correlation Between National Storm and Kewaunee Scientific

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

By analyzing existing cross correlation between National Storm Recovery and Kewaunee Scientific, you can compare the effects of market volatilities on National Storm and Kewaunee Scientific 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 Storm with a short position of Kewaunee Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storm and Kewaunee Scientific.

Diversification Opportunities for National Storm and Kewaunee Scientific

-0.76

Correlation Coefficient

National Storm  Kewaunee Scientific

Pay attention - limited upside

The 3 months correlation between National and Kewaunee is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding National Storm Recovery and Kewaunee Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kewaunee Scientific and National Storm 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 Storm Recovery are associated (or correlated) with Kewaunee Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kewaunee Scientific has no effect on the direction of National Storm i.e., National Storm and Kewaunee Scientific go up and down completely randomly.

Pair Corralation between National Storm and Kewaunee Scientific

Given the investment horizon of 90 days National Storm Recovery is expected to under-perform the Kewaunee Scientific. In addition to that, National Storm is 2.75 times more volatile than Kewaunee Scientific. It trades about -0.02 of its total potential returns per unit of risk. Kewaunee Scientific is currently generating about 0.15 per unit of volatility. If you would invest  3,654  in Kewaunee Scientific on September 14, 2024 and sell it today you would earn a total of  1,746  from holding Kewaunee Scientific or generate 47.78% return on investment over 90 days.

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

National Storm Recovery  vs.  Kewaunee Scientific

National Storm Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storm Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kewaunee Scientific

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kewaunee Scientific are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kewaunee Scientific unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Storm and Kewaunee Scientific

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

The idea behind National Storm Recovery and Kewaunee Scientific 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.