Correlation Between ESS Tech and Kimball Electronics

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

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

Diversification Opportunities for ESS Tech and Kimball Electronics

0.6

Correlation Coefficient

ESS Tech  Kimball Electronics

Poor diversification

The 3 months correlation between ESS and Kimball is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics and ESS Tech 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 ESS Tech are associated (or correlated) with Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of ESS Tech i.e., ESS Tech and Kimball Electronics go up and down completely randomly.

Pair Corralation between ESS Tech and Kimball Electronics

Considering the 90-day investment horizon ESS Tech is expected to generate 4.08 times more return on investment than Kimball Electronics. However, ESS Tech is 4.08 times more volatile than Kimball Electronics. It trades about 0.1 of its potential returns per unit of risk. Kimball Electronics is currently generating about 0.25 per unit of risk. If you would invest  70.00  in ESS Tech on February 22, 2024 and sell it today you would earn a total of  7.42  from holding ESS Tech or generate 10.6% return on investment over 90 days.

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

ESS Tech  vs.  Kimball Electronics

ESS Tech

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ESS Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ESS Tech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Kimball Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Kimball Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ESS Tech and Kimball Electronics

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

The idea behind ESS Tech and Kimball Electronics 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.