Correlation Between Arendals Fossekompani and Kitron ASA

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

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

Diversification Opportunities for Arendals Fossekompani and Kitron ASA

-0.82

Correlation Coefficient

Arendals Fossekompani  Kitron ASA

Pay attention - limited upside

The 3 months correlation between Arendals and Kitron is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arendals Fossekompani ASA and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and Arendals Fossekompani 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 Arendals Fossekompani ASA are associated (or correlated) with Kitron ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kitron ASA has no effect on the direction of Arendals Fossekompani i.e., Arendals Fossekompani and Kitron ASA go up and down completely randomly.

Pair Corralation between Arendals Fossekompani and Kitron ASA

Assuming the 90 days trading horizon Arendals Fossekompani ASA is expected to under-perform the Kitron ASA. But the stock apears to be less risky and, when comparing its historical volatility, Arendals Fossekompani ASA is 1.35 times less risky than Kitron ASA. The stock trades about -0.07 of its potential returns per unit of risk. The Kitron ASA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,448  in Kitron ASA on December 31, 2024 and sell it today you would earn a total of  976.00  from holding Kitron ASA or generate 28.31% return on investment over 90 days.

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

Arendals Fossekompani ASA  vs.  Kitron ASA

Arendals Fossekompani ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arendals Fossekompani ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kitron ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arendals Fossekompani and Kitron ASA

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

The idea behind Arendals Fossekompani ASA and Kitron 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.