Correlation Between Kinnevik Investment and Diversified Energy

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

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

Diversification Opportunities for Kinnevik Investment and Diversified Energy

-0.24

Correlation Coefficient

Kinnevik Investment  Diversified Energy

Very good diversification

The 3 months correlation between Kinnevik and Diversified is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy and Kinnevik Investment 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 Kinnevik Investment AB are associated (or correlated) with Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Kinnevik Investment i.e., Kinnevik Investment and Diversified Energy go up and down completely randomly.

Pair Corralation between Kinnevik Investment and Diversified Energy

Assuming the 90 days trading horizon Kinnevik Investment AB is expected to generate 0.53 times more return on investment than Diversified Energy. However, Kinnevik Investment AB is 1.88 times less risky than Diversified Energy. It trades about -0.04 of its potential returns per unit of risk. Diversified Energy is currently generating about -0.08 per unit of risk. If you would invest  7,507  in Kinnevik Investment AB on September 21, 2024 and sell it today you would lose (107.00) from holding Kinnevik Investment AB or give up 1.43% of portfolio value over 90 days.

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

Kinnevik Investment AB  vs.  Diversified Energy

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Diversified Energy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Diversified Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinnevik Investment and Diversified Energy

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

The idea behind Kinnevik Investment AB and Diversified Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.