Correlation Between Bellway PLC and Kinnevik Investment

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

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

Diversification Opportunities for Bellway PLC and Kinnevik Investment

0.16

Correlation Coefficient

Bellway PLC  Kinnevik Investment

Average diversification

The 3 months correlation between Bellway and Kinnevik is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bellway PLC and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Bellway PLC 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 Bellway PLC are associated (or correlated) with Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Bellway PLC i.e., Bellway PLC and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Bellway PLC and Kinnevik Investment

Assuming the 90 days trading horizon Bellway PLC is expected to generate 63.26 times more return on investment than Kinnevik Investment. However, Bellway PLC is 63.26 times more volatile than Kinnevik Investment AB. It trades about 0.11 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.06 per unit of risk. If you would invest  253,400  in Bellway PLC on December 5, 2024 and sell it today you would lose (27,400) from holding Bellway PLC or give up 10.81% of portfolio value over 90 days.

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

Bellway PLC  vs.  Kinnevik Investment AB

Bellway PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bellway PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bellway PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kinnevik Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kinnevik Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bellway PLC and Kinnevik Investment

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

The idea behind Bellway PLC and Kinnevik Investment AB 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.