Correlation Between NewFunds Low and Kap Industrial

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

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

Diversification Opportunities for NewFunds Low and Kap Industrial

0.23

Correlation Coefficient

NewFunds Low  Kap Industrial

Modest diversification

The 3 months correlation between NewFunds and Kap is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds Low Volatility 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 NewFunds Low 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 NewFunds Low Volatility 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 NewFunds Low i.e., NewFunds Low and Kap Industrial go up and down completely randomly.

Pair Corralation between NewFunds Low and Kap Industrial

Assuming the 90 days trading horizon NewFunds Low Volatility is expected to generate 0.37 times more return on investment than Kap Industrial. However, NewFunds Low Volatility is 2.74 times less risky than Kap Industrial. It trades about 0.12 of its potential returns per unit of risk. Kap Industrial Holdings is currently generating about -0.05 per unit of risk. If you would invest  121,100  in NewFunds Low Volatility on September 12, 2024 and sell it today you would earn a total of  5,800  from holding NewFunds Low Volatility or generate 4.79% return on investment over 90 days.

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

NewFunds Low Volatility  vs.  Kap Industrial Holdings

NewFunds Low Volatility

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Low Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Kap Industrial Holdings

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Kap Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NewFunds Low and Kap Industrial

The main advantage of trading using opposite NewFunds Low and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewFunds Low 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 NewFunds Low Volatility 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.