Correlation Between Central Asia and Kinnevik Investment

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

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

Diversification Opportunities for Central Asia and Kinnevik Investment

0.62

Correlation Coefficient

Central Asia  Kinnevik Investment

Poor diversification

The 3 months correlation between Central and Kinnevik is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Central Asia 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 Central Asia Metals 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 Central Asia i.e., Central Asia and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Central Asia and Kinnevik Investment

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Kinnevik Investment. But the stock apears to be less risky and, when comparing its historical volatility, Central Asia Metals is 1.51 times less risky than Kinnevik Investment. The stock trades about -0.06 of its potential returns per unit of risk. The Kinnevik Investment AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Central Asia Metals  vs.  Kinnevik Investment AB

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Central Asia and Kinnevik Investment

The main advantage of trading using opposite Central Asia and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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 Central Asia Metals 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.