Correlation Between European Metals and Kinnevik Investment

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

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

Diversification Opportunities for European Metals and Kinnevik Investment

-0.38

Correlation Coefficient

European Metals  Kinnevik Investment

Very good diversification

The 3 months correlation between European and Kinnevik is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Kinnevik Investment go up and down completely randomly.

Pair Corralation between European Metals and Kinnevik Investment

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Kinnevik Investment. In addition to that, European Metals is 1.62 times more volatile than Kinnevik Investment AB. It trades about -0.1 of its total potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.17 per unit of volatility. If you would invest  7,655  in Kinnevik Investment AB on December 2, 2024 and sell it today you would earn a total of  1,034  from holding Kinnevik Investment AB or generate 13.51% return on investment over 90 days.

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

European Metals Holdings  vs.  Kinnevik Investment AB

European Metals Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kinnevik Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kinnevik Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Kinnevik Investment

The main advantage of trading using opposite European Metals and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.