Correlation Between Kimberly Clark and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Kimberly Clark and Kaiser Aluminum 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 Kimberly Clark and Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kimberly Clark and Kaiser Aluminum, you can compare the effects of market volatilities on Kimberly Clark and Kaiser Aluminum 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 Kimberly Clark with a short position of Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimberly Clark and Kaiser Aluminum.
Diversification Opportunities for Kimberly Clark and Kaiser Aluminum
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kimberly and Kaiser is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and Kimberly Clark 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 Kimberly Clark are associated (or correlated) with Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Kimberly Clark i.e., Kimberly Clark and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Kimberly Clark and Kaiser Aluminum
Considering the 90-day investment horizon Kimberly Clark is expected to generate 7.99 times less return on investment than Kaiser Aluminum. But when comparing it to its historical volatility, Kimberly Clark is 2.53 times less risky than Kaiser Aluminum. It trades about 0.01 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,705 in Kaiser Aluminum on January 24, 2024 and sell it today you would earn a total of 1,277 from holding Kaiser Aluminum or generate 16.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kimberly Clark vs. Kaiser Aluminum
Performance |
| Timeline |
| Kimberly Clark |
| Kaiser Aluminum |
Kimberly Clark and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kimberly Clark and Kaiser Aluminum
The main advantage of trading using opposite Kimberly Clark and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly Clark position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| Kimberly Clark vs. Unilever PLC ADR | Kimberly Clark vs. Estee Lauder Companies | Kimberly Clark vs. ELF Beauty | Kimberly Clark vs. Coty Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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