Correlation Between Kimball Electronics and Acuity Brands

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

Diversification Opportunities for Kimball Electronics and Acuity Brands

-0.58
  Correlation Coefficient

Excellent diversification

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

Pair Corralation between Kimball Electronics and Acuity Brands

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 1.21 times more return on investment than Acuity Brands. However, Kimball Electronics is 1.21 times more volatile than Acuity Brands. It trades about 0.01 of its potential returns per unit of risk. Acuity Brands is currently generating about -0.32 per unit of risk. If you would invest  2,075  in Kimball Electronics on January 22, 2024 and sell it today you would earn a total of  3.00  from holding Kimball Electronics or generate 0.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kimball Electronics  vs.  Acuity Brands

 Performance 
       Timeline  
Kimball Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 abnormal 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.
Acuity Brands 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Acuity Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Acuity Brands may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Kimball Electronics and Acuity Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kimball Electronics and Acuity Brands

The main advantage of trading using opposite Kimball Electronics and Acuity Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimball Electronics position performs unexpectedly, Acuity Brands 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 Acuity Brands will offset losses from the drop in Acuity Brands' long position.
The idea behind Kimball Electronics and Acuity Brands 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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