Correlation Between EM and KICK

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

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

Diversification Opportunities for EM and KICK

0.01

Correlation Coefficient

EM  KICK

Significant diversification

The 3 months correlation between EM and KICK is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding EM and KICK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KICK and EM 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 EM are associated (or correlated) with KICK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KICK has no effect on the direction of EM i.e., EM and KICK go up and down completely randomly.

Pair Corralation between EM and KICK

If you would invest  0.04  in KICK on January 26, 2024 and sell it today you would earn a total of  0.00  from holding KICK or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

EM  vs.  KICK

EM

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EM exhibited solid returns over the last few months and may actually be approaching a breakup point.

KICK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KICK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, KICK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EM and KICK

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

The idea behind EM and KICK 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.