Correlation Between Constellium and Kimberly Clark

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

Diversification Opportunities for Constellium and Kimberly Clark

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Constellium and Kimberly is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Kimberly-Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly-Clark and Constellium 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 Constellium Nv are associated (or correlated) with Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly-Clark has no effect on the direction of Constellium i.e., Constellium and Kimberly Clark go up and down completely randomly.

Pair Corralation between Constellium and Kimberly Clark

Given the investment horizon of 90 days Constellium Nv is expected to generate 1.95 times more return on investment than Kimberly Clark. However, Constellium is 1.95 times more volatile than Kimberly Clark. It trades about 0.44 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.39 per unit of risk. If you would invest  1,878  in Constellium Nv on December 30, 2023 and sell it today you would earn a total of  333.00  from holding Constellium Nv or generate 17.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Constellium Nv  vs.  Kimberly-Clark

 Performance 
       Timeline  
Constellium Nv 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Constellium displayed solid returns over the last few months and may actually be approaching a breakup point.
Kimberly-Clark 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Kimberly Clark may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Constellium and Kimberly Clark Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellium and Kimberly Clark

The main advantage of trading using opposite Constellium and Kimberly Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium position performs unexpectedly, Kimberly Clark 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 Kimberly Clark will offset losses from the drop in Kimberly Clark's long position.
The idea behind Constellium Nv and Kimberly Clark 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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