Correlation Between Axfood AB and Komercni Banka

Can any of the company-specific risk be diversified away by investing in both Axfood AB and Komercni Banka 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 Axfood AB and Komercni Banka into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axfood AB and Komercni Banka, you can compare the effects of market volatilities on Axfood AB and Komercni Banka 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 Axfood AB with a short position of Komercni Banka. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Komercni Banka.

Diversification Opportunities for Axfood AB and Komercni Banka

0.09

Correlation Coefficient

Axfood AB  Komercni Banka

Significant diversification

The 3 months correlation between Axfood and Komercni is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Komercni Banka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komercni Banka and Axfood AB 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 Axfood AB are associated (or correlated) with Komercni Banka. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komercni Banka has no effect on the direction of Axfood AB i.e., Axfood AB and Komercni Banka go up and down completely randomly.

Pair Corralation between Axfood AB and Komercni Banka

Assuming the 90 days trading horizon Axfood AB is expected to under-perform the Komercni Banka. But the stock apears to be less risky and, when comparing its historical volatility, Axfood AB is 16.03 times less risky than Komercni Banka. The stock trades about -0.02 of its potential returns per unit of risk. The Komercni Banka is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  53,400  in Komercni Banka on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Komercni Banka or generate 0.0% return on investment over 90 days.

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

Axfood AB  vs.  Komercni Banka

Axfood AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Komercni Banka

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komercni Banka are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Komercni Banka unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axfood AB and Komercni Banka

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

The idea behind Axfood AB and Komercni Banka 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.