Correlation Between Kimball Electronics and Super Micro

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

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

Diversification Opportunities for Kimball Electronics and Super Micro

Poor diversification

The 3 months correlation between Kimball and Super is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Super Micro Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Micro Computer 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 Super Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Micro Computer has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Super Micro go up and down completely randomly.

Pair Corralation between Kimball Electronics and Super Micro

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 0.51 times more return on investment than Super Micro. However, Kimball Electronics is 1.95 times less risky than Super Micro. It trades about -0.18 of its potential returns per unit of risk. Super Micro Computer is currently generating about -0.12 per unit of risk. If you would invest  2,901  in Kimball Electronics on June 27, 2023 and sell it today you would lose (169.00) from holding Kimball Electronics or give up 5.83% of portfolio value over 90 days.

Kimball Electronics  vs.  Super Micro Computer

Kimball Electronics

Kimball Performance

2 of 100

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.

Super Micro Computer

Super Performance

3 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Super Micro may actually be approaching a critical reversion point that can send shares even higher in October 2023.

Pair Trading with Kimball Electronics and Super Micro

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

The idea behind Kimball Electronics and Super Micro Computer 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.