Correlation Between KRAKATAU STEEL and Assicurazioni Generali

Can any of the company-specific risk be diversified away by investing in both KRAKATAU STEEL and Assicurazioni Generali 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 KRAKATAU STEEL and Assicurazioni Generali into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KRAKATAU STEEL B and Assicurazioni Generali SpA, you can compare the effects of market volatilities on KRAKATAU STEEL and Assicurazioni Generali 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 KRAKATAU STEEL with a short position of Assicurazioni Generali. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAKATAU STEEL and Assicurazioni Generali.

Diversification Opportunities for KRAKATAU STEEL and Assicurazioni Generali

0.3

Correlation Coefficient

KRAKATAU STEEL  Assicurazioni Generali

Weak diversification

The 3 months correlation between KRAKATAU and Assicurazioni is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Assicurazioni Generali SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assicurazioni Generali and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with Assicurazioni Generali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assicurazioni Generali has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Assicurazioni Generali go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Assicurazioni Generali

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 3.6 times more return on investment than Assicurazioni Generali. However, KRAKATAU STEEL is 3.6 times more volatile than Assicurazioni Generali SpA. It trades about 0.15 of its potential returns per unit of risk. Assicurazioni Generali SpA is currently generating about 0.12 per unit of risk. If you would invest  0.40  in KRAKATAU STEEL B on September 16, 2024 and sell it today you would earn a total of  0.20  from holding KRAKATAU STEEL B or generate 50.0% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  Assicurazioni Generali SpA

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Assicurazioni Generali

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assicurazioni Generali SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Assicurazioni Generali may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KRAKATAU STEEL and Assicurazioni Generali

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

The idea behind KRAKATAU STEEL B and Assicurazioni Generali SpA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.