Correlation Between United Guardian and Kimberly Clark

Can any of the company-specific risk be diversified away by investing in both United Guardian and Kimberly Clark 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 United Guardian and Kimberly Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for United Guardian and Kimberly Clark

0.64

Correlation Coefficient

United Guardian  Kimberly Clark

Poor diversification

The 3 months correlation between United and Kimberly is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark and United Guardian 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 United Guardian are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of United Guardian i.e., United Guardian and Kimberly Clark go up and down completely randomly.

Pair Corralation between United Guardian and Kimberly Clark

Allowing for the 90-day total investment horizon United Guardian is expected to generate 2.7 times more return on investment than Kimberly Clark. However, United Guardian is 2.7 times more volatile than Kimberly Clark. It trades about 0.05 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.05 per unit of risk. If you would invest  724.00  in United Guardian on September 25, 2024 and sell it today you would earn a total of  233.00  from holding United Guardian or generate 32.18% return on investment over 90 days.

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

United Guardian  vs.  Kimberly Clark

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Kimberly Clark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Kimberly Clark is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Guardian and Kimberly Clark

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

The idea behind United Guardian and Kimberly Clark 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.