Can any of the company-specific risk be diversified away by investing in both Caldwell Partners and Kforce 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 Caldwell Partners and Kforce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Caldwell Partners and Kforce Inc, you can compare the effects of market volatilities on Caldwell Partners and Kforce 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 Caldwell Partners with a short position of Kforce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caldwell Partners and Kforce.
Diversification Opportunities for Caldwell Partners and Kforce
The 3 months correlation between Caldwell and Kforce is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Caldwell Partners and Kforce Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kforce Inc and Caldwell Partners 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 The Caldwell Partners are associated (or correlated) with Kforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kforce Inc has no effect on the direction of Caldwell Partners i.e., Caldwell Partners and Kforce go up and down completely randomly.
Pair Corralation between Caldwell Partners and Kforce
Assuming the 90 days horizon The Caldwell Partners is expected to generate 2.51 times more return on investment than Kforce. However, Caldwell Partners is 2.51 times more volatile than Kforce Inc. It trades about 0.14 of its potential returns per unit of risk. Kforce Inc is currently generating about -0.08 per unit of risk. If you would invest 60.00 in The Caldwell Partners on March 6, 2024 and sell it today you would earn a total of 4.00 from holding The Caldwell Partners or generate 6.67% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in The Caldwell Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Caldwell Partners reported solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Kforce Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.