Correlation Between KRAFT and Kingsway Financial

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

By analyzing existing cross correlation between KRAFT FOODS INC and Kingsway Financial Services, you can compare the effects of market volatilities on KRAFT and Kingsway Financial 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 KRAFT with a short position of Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAFT and Kingsway Financial.

Diversification Opportunities for KRAFT and Kingsway Financial

-0.38

Correlation Coefficient

KRAFT  Kingsway Financial

Very good diversification

The 3 months correlation between KRAFT and Kingsway is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding KRAFT FOODS INC and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial and KRAFT 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 KRAFT FOODS INC are associated (or correlated) with Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of KRAFT i.e., KRAFT and Kingsway Financial go up and down completely randomly.

Pair Corralation between KRAFT and Kingsway Financial

Assuming the 90 days trading horizon KRAFT FOODS INC is expected to under-perform the Kingsway Financial. But the bond apears to be less risky and, when comparing its historical volatility, KRAFT FOODS INC is 1.04 times less risky than Kingsway Financial. The bond trades about -0.29 of its potential returns per unit of risk. The Kingsway Financial Services is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  842.00  in Kingsway Financial Services on October 10, 2024 and sell it today you would lose (40.00) from holding Kingsway Financial Services or give up 4.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.67%
Values	Daily Returns

KRAFT FOODS INC  vs.  Kingsway Financial Services

KRAFT FOODS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRAFT FOODS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KRAFT FOODS INC investors.

Kingsway Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KRAFT and Kingsway Financial

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

The idea behind KRAFT FOODS INC and Kingsway Financial Services 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.