Correlation Between Sapiens International and Kaiser Aluminum

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

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

Diversification Opportunities for Sapiens International and Kaiser Aluminum

-0.28

Correlation Coefficient

Sapiens International  Kaiser Aluminum

Very good diversification

The 3 months correlation between Sapiens and Kaiser is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and Sapiens International 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 Sapiens International are associated (or correlated) with Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Sapiens International i.e., Sapiens International and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Sapiens International and Kaiser Aluminum

Given the investment horizon of 90 days Sapiens International is expected to generate 0.77 times more return on investment than Kaiser Aluminum. However, Sapiens International is 1.3 times less risky than Kaiser Aluminum. It trades about 0.03 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.08 per unit of risk. If you would invest  2,674  in Sapiens International on December 28, 2024 and sell it today you would earn a total of  53.00  from holding Sapiens International or generate 1.98% return on investment over 90 days.

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

Sapiens International  vs.  Kaiser Aluminum

Sapiens International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sapiens International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sapiens International and Kaiser Aluminum

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

The idea behind Sapiens International and Kaiser Aluminum 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 Transaction History module to view history of all your transactions and understand their impact on performance.