Correlation Between AF Gruppen and Kid ASA

Can any of the company-specific risk be diversified away by investing in both AF Gruppen and Kid ASA 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 AF Gruppen and Kid ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AF Gruppen and Kid ASA

0.01

Correlation Coefficient

AF Gruppen  Kid ASA

Significant diversification

The 3 months correlation between AFG and Kid is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and Kid ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid ASA and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with Kid ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid ASA has no effect on the direction of AF Gruppen i.e., AF Gruppen and Kid ASA go up and down completely randomly.

Pair Corralation between AF Gruppen and Kid ASA

Assuming the 90 days trading horizon AF Gruppen ASA is expected to under-perform the Kid ASA. But the stock apears to be less risky and, when comparing its historical volatility, AF Gruppen ASA is 1.11 times less risky than Kid ASA. The stock trades about -0.03 of its potential returns per unit of risk. The Kid ASA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,400  in Kid ASA on December 27, 2024 and sell it today you would earn a total of  1,880  from holding Kid ASA or generate 14.03% return on investment over 90 days.

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

AF Gruppen ASA  vs.  Kid ASA

AF Gruppen ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days AF Gruppen ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, AF Gruppen is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Kid ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kid ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Kid ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AF Gruppen and Kid ASA

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

The idea behind AF Gruppen ASA and Kid ASA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.