Correlation Between Vericel Corp and Kingsway Financial

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Can any of the company-specific risk be diversified away by investing in both Vericel Corp and Kingsway Financial 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 Vericel Corp and Kingsway Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vericel Corp Ord and Kingsway Financial Services, you can compare the effects of market volatilities on Vericel Corp and Kingsway Financial 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 Vericel Corp with a short position of Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vericel Corp and Kingsway Financial.

Diversification Opportunities for Vericel Corp and Kingsway Financial

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Vericel and Kingsway is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial and Vericel Corp 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 Vericel Corp Ord are associated (or correlated) with Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Vericel Corp i.e., Vericel Corp and Kingsway Financial go up and down completely randomly.

Pair Corralation between Vericel Corp and Kingsway Financial

Given the investment horizon of 90 days Vericel Corp Ord is expected to generate 1.4 times more return on investment than Kingsway Financial. However, Vericel Corp is 1.4 times more volatile than Kingsway Financial Services. It trades about 0.1 of its potential returns per unit of risk. Kingsway Financial Services is currently generating about 0.01 per unit of risk. If you would invest  3,395  in Vericel Corp Ord on January 16, 2024 and sell it today you would earn a total of  1,395  from holding Vericel Corp Ord or generate 41.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vericel Corp Ord  vs.  Kingsway Financial Services

 Performance 
       Timeline  
Vericel Corp Ord 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.
Kingsway Financial 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Kingsway Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Vericel Corp and Kingsway Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vericel Corp and Kingsway Financial

The main advantage of trading using opposite Vericel Corp and Kingsway Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp position performs unexpectedly, Kingsway Financial 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 Kingsway Financial will offset losses from the drop in Kingsway Financial's long position.
The idea behind Vericel Corp Ord and Kingsway Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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