Correlation Between Kimball Electronics and Knowles Cor

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

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

Diversification Opportunities for Kimball Electronics and Knowles Cor

0.61

Correlation Coefficient

Kimball Electronics  Knowles Cor

Poor diversification

The 3 months correlation between Kimball and Knowles is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Knowles Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles Cor and Kimball Electronics 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 Kimball Electronics are associated (or correlated) with Knowles Cor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Cor has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Knowles Cor go up and down completely randomly.

Pair Corralation between Kimball Electronics and Knowles Cor

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 3.89 times less return on investment than Knowles Cor. But when comparing it to its historical volatility, Kimball Electronics is 1.09 times less risky than Knowles Cor. It trades about 0.02 of its potential returns per unit of risk. Knowles Cor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,610  in Knowles Cor on February 3, 2024 and sell it today you would earn a total of  47.00  from holding Knowles Cor or generate 2.92% return on investment over 90 days.

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

Kimball Electronics  vs.  Knowles Cor

Kimball Electronics

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, Kimball Electronics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Knowles Cor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Knowles Cor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kimball Electronics and Knowles Cor

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

The idea behind Kimball Electronics and Knowles Cor 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.