Correlation Between Trematon Capital and Kap Industrial

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

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

Diversification Opportunities for Trematon Capital and Kap Industrial

0.39

Correlation Coefficient

Trematon Capital  Kap Industrial

Weak diversification

The 3 months correlation between Trematon and Kap is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Trematon Capital Investments 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 Trematon Capital 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 Trematon Capital Investments 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 Trematon Capital i.e., Trematon Capital and Kap Industrial go up and down completely randomly.

Pair Corralation between Trematon Capital and Kap Industrial

Assuming the 90 days trading horizon Trematon Capital Investments is expected to under-perform the Kap Industrial. In addition to that, Trematon Capital is 1.41 times more volatile than Kap Industrial Holdings. It trades about -0.1 of its total potential returns per unit of risk. Kap Industrial Holdings is currently generating about -0.05 per unit of volatility. If you would invest  29,600  in Kap Industrial Holdings on December 30, 2024 and sell it today you would lose (3,200) from holding Kap Industrial Holdings or give up 10.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Trematon Capital Investments  vs.  Kap Industrial Holdings

Trematon Capital Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trematon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm 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 Trematon Capital and Kap Industrial

The main advantage of trading using opposite Trematon Capital and Kap Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trematon Capital 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 Trematon Capital Investments 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.