Correlation Between Goodtech and Kraft Bank

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

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

Diversification Opportunities for Goodtech and Kraft Bank

-0.47

Correlation Coefficient

Goodtech  Kraft Bank

Very good diversification

The 3 months correlation between Goodtech and Kraft is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech and Kraft Bank Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraft Bank Asa and Goodtech 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 Goodtech are associated (or correlated) with Kraft Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraft Bank Asa has no effect on the direction of Goodtech i.e., Goodtech and Kraft Bank go up and down completely randomly.

Pair Corralation between Goodtech and Kraft Bank

Assuming the 90 days trading horizon Goodtech is expected to generate 0.94 times more return on investment than Kraft Bank. However, Goodtech is 1.07 times less risky than Kraft Bank. It trades about -0.02 of its potential returns per unit of risk. Kraft Bank Asa is currently generating about -0.07 per unit of risk. If you would invest  1,005  in Goodtech on October 26, 2024 and sell it today you would lose (27.00) from holding Goodtech or give up 2.69% of portfolio value over 90 days.

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

Goodtech  vs.  Kraft Bank Asa

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Goodtech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kraft Bank Asa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Goodtech and Kraft Bank

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

The idea behind Goodtech and Kraft Bank 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.