Correlation Between Kimball Electronics and ABB

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

By analyzing existing cross correlation between Kimball Electronics and ABB Ltd ADR, you can compare the effects of market volatilities on Kimball Electronics and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kimball Electronics and ABB.

Diversification Opportunities for Kimball Electronics and ABB

-0.72

Correlation Coefficient

Kimball Electronics  ABB

Pay attention - limited upside

The 3 months correlation between Kimball and ABB is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB Ltd ADR has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and ABB go up and down completely randomly.

Pair Corralation between Kimball Electronics and ABB

If you would invest  2,096  in Kimball Electronics on January 20, 2024 and sell it today you would lose (3.00) from holding Kimball Electronics or give up 0.14% of portfolio value over 90 days.

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

Kimball Electronics  vs.  ABB Ltd ADR

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ABB Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABB Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ABB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kimball Electronics and ABB

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

The idea behind Kimball Electronics and ABB Ltd ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.