Correlation Between Cavotec SA and KABE Group

Can any of the company-specific risk be diversified away by investing in both Cavotec SA and KABE Group 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 Cavotec SA and KABE Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Cavotec SA and KABE Group

-0.07

Correlation Coefficient

Cavotec SA  KABE Group

Good diversification

The 3 months correlation between Cavotec and KABE is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cavotec SA and KABE Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KABE Group AB and Cavotec SA 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 Cavotec SA are associated (or correlated) with KABE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KABE Group AB has no effect on the direction of Cavotec SA i.e., Cavotec SA and KABE Group go up and down completely randomly.

Pair Corralation between Cavotec SA and KABE Group

Assuming the 90 days trading horizon Cavotec SA is expected to under-perform the KABE Group. In addition to that, Cavotec SA is 2.34 times more volatile than KABE Group AB. It trades about -0.01 of its total potential returns per unit of risk. KABE Group AB is currently generating about 0.23 per unit of volatility. If you would invest  29,500  in KABE Group AB on October 8, 2024 and sell it today you would earn a total of  1,000.00  from holding KABE Group AB or generate 3.39% return on investment over 90 days.

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

Cavotec SA  vs.  KABE Group AB

Cavotec SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

KABE Group AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KABE Group AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, KABE Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cavotec SA and KABE Group

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

The idea behind Cavotec SA and KABE Group 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.