Correlation Between Kinnevik Investment and Mercantile Investment

Can any of the company-specific risk be diversified away by investing in both Kinnevik Investment and Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment, you can compare the effects of market volatilities on Kinnevik Investment and Mercantile Investment 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 Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinnevik Investment and Mercantile Investment.

Diversification Opportunities for Kinnevik Investment and Mercantile Investment

0.37

Correlation Coefficient

Kinnevik Investment  Mercantile Investment

Weak diversification

The 3 months correlation between Kinnevik and Mercantile is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Kinnevik Investment i.e., Kinnevik Investment and Mercantile Investment go up and down completely randomly.

Pair Corralation between Kinnevik Investment and Mercantile Investment

Assuming the 90 days trading horizon Kinnevik Investment AB is expected to generate 2.2 times more return on investment than Mercantile Investment. However, Kinnevik Investment is 2.2 times more volatile than The Mercantile Investment. It trades about 0.08 of its potential returns per unit of risk. The Mercantile Investment is currently generating about 0.02 per unit of risk. If you would invest  7,287  in Kinnevik Investment AB on September 12, 2024 and sell it today you would earn a total of  740.00  from holding Kinnevik Investment AB or generate 10.16% return on investment over 90 days.

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

Kinnevik Investment AB  vs.  The Mercantile Investment

Kinnevik Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kinnevik Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

The Mercantile Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Mercantile Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Mercantile Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kinnevik Investment and Mercantile Investment

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

The idea behind Kinnevik Investment AB and The Mercantile Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.