Correlation Between Kimball Electronics and Advanced Energy

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

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

Diversification Opportunities for Kimball Electronics and Advanced Energy

0.75

Correlation Coefficient

Kimball Electronics  Advanced Energy

Poor diversification

The 3 months correlation between Kimball and Advanced is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Kimball Electronics and Advanced Energy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Indu 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 Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Indu has no effect on the direction of Kimball Electronics i.e., Kimball Electronics and Advanced Energy go up and down completely randomly.

Pair Corralation between Kimball Electronics and Advanced Energy

Allowing for the 90-day total investment horizon Kimball Electronics is expected to generate 1.38 times less return on investment than Advanced Energy. In addition to that, Kimball Electronics is 1.07 times more volatile than Advanced Energy Industries. It trades about 0.05 of its total potential returns per unit of risk. Advanced Energy Industries is currently generating about 0.07 per unit of volatility. If you would invest  10,600  in Advanced Energy Industries on August 30, 2024 and sell it today you would earn a total of  857.00  from holding Advanced Energy Industries or generate 8.08% return on investment over 90 days.

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

Kimball Electronics  vs.  Advanced Energy Industries

Kimball Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimball Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Kimball Electronics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Advanced Energy Indu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Advanced Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Kimball Electronics and Advanced Energy

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

The idea behind Kimball Electronics and Advanced Energy Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.