Correlation Between Kennedy-Wilson Holdings and DOW

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Kennedy-Wilson Holdings and DOW 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 Kennedy-Wilson Holdings and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kennedy-Wilson Holdings and DOW, you can compare the effects of market volatilities on Kennedy-Wilson Holdings and DOW 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 Kennedy-Wilson Holdings with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kennedy-Wilson Holdings and DOW.

Diversification Opportunities for Kennedy-Wilson Holdings and DOW

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Kennedy-Wilson and DOW is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy-Wilson Holdings and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Kennedy-Wilson Holdings 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 Kennedy-Wilson Holdings are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Kennedy-Wilson Holdings i.e., Kennedy-Wilson Holdings and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Kennedy-Wilson Holdings and DOW

Allowing for the 90-day total investment horizon Kennedy-Wilson Holdings is expected to generate 1.69 times more return on investment than DOW. However, Kennedy-Wilson Holdings is 1.69 times more volatile than DOW. It trades about 0.02 of its potential returns per unit of risk. DOW is currently generating about 0.01 per unit of risk. If you would invest  1,349  in Kennedy-Wilson Holdings on July 6, 2022 and sell it today you would earn a total of  198.00  from holding Kennedy-Wilson Holdings or generate 14.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Kennedy-Wilson Holdings  vs.  DOW

 Performance (%) 
       Timeline  

Kennedy-Wilson Holdings and DOW Volatility Contrast

   Predicted Return Density   
       Returns  

Kennedy-Wilson Holdings

Pair trading matchups for Kennedy-Wilson Holdings

DOW

Pair trading matchups for DOW

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with Kennedy-Wilson Holdings and DOW

The main advantage of trading using opposite Kennedy-Wilson Holdings and DOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kennedy-Wilson Holdings position performs unexpectedly, DOW 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 DOW will offset losses from the drop in DOW's long position.
Kennedy-Wilson Holdings vs. Amazon Inc
The idea behind Kennedy-Wilson Holdings and DOW 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Go
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Go
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account
Go
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go