Correlation Between Ubiquiti Networks and Kimball Electronics

Can any of the company-specific risk be diversified away by investing in both Ubiquiti Networks and Kimball Electronics 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 Ubiquiti Networks and Kimball Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ubiquiti Networks and Kimball Electronics

0.48

Correlation Coefficient

Ubiquiti Networks  Kimball Electronics

Very weak diversification

The 3 months correlation between Ubiquiti and Kimball is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics and Ubiquiti Networks 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 Ubiquiti Networks are associated (or correlated) with Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of Ubiquiti Networks i.e., Ubiquiti Networks and Kimball Electronics go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and Kimball Electronics

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.73 times more return on investment than Kimball Electronics. However, Ubiquiti Networks is 1.73 times more volatile than Kimball Electronics. It trades about -0.03 of its potential returns per unit of risk. Kimball Electronics is currently generating about -0.09 per unit of risk. If you would invest  33,494  in Ubiquiti Networks on December 28, 2024 and sell it today you would lose (2,872) from holding Ubiquiti Networks or give up 8.57% of portfolio value over 90 days.

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

Ubiquiti Networks  vs.  Kimball Electronics

Ubiquiti Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Ubiquiti Networks is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Kimball Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimball Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 Ubiquiti Networks and Kimball Electronics

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

The idea behind Ubiquiti Networks and Kimball Electronics 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .