Correlation Between Eastman Kodak and Koninklijke Philips

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Can any of the company-specific risk be diversified away by investing in both Eastman Kodak and Koninklijke Philips 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 Eastman Kodak and Koninklijke Philips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastman Kodak Co and Koninklijke Philips NV, you can compare the effects of market volatilities on Eastman Kodak and Koninklijke Philips 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 Eastman Kodak with a short position of Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Kodak and Koninklijke Philips.

Diversification Opportunities for Eastman Kodak and Koninklijke Philips

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Eastman and Koninklijke is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Kodak Co and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and Eastman Kodak 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 Eastman Kodak Co are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Eastman Kodak i.e., Eastman Kodak and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Eastman Kodak and Koninklijke Philips

Given the investment horizon of 90 days Eastman Kodak Co is expected to generate 1.78 times more return on investment than Koninklijke Philips. However, Eastman Kodak is 1.78 times more volatile than Koninklijke Philips NV. It trades about 0.02 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.0 per unit of risk. If you would invest  485.00  in Eastman Kodak Co on December 29, 2023 and sell it today you would lose (5.00) from holding Eastman Kodak Co or give up 1.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Eastman Kodak Co  vs.  Koninklijke Philips NV

 Performance 
       Timeline  
Eastman Kodak 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Kodak Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Eastman Kodak disclosed solid returns over the last few months and may actually be approaching a breakup point.
Koninklijke Philips 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eastman Kodak and Koninklijke Philips Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eastman Kodak and Koninklijke Philips

The main advantage of trading using opposite Eastman Kodak and Koninklijke Philips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Kodak position performs unexpectedly, Koninklijke Philips 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 Koninklijke Philips will offset losses from the drop in Koninklijke Philips' long position.
The idea behind Eastman Kodak Co and Koninklijke Philips NV 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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