Correlation Between Iceland Seafood and Kvika Banki

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

By analyzing existing cross correlation between Iceland Seafood International and Kvika banki hf, you can compare the effects of market volatilities on Iceland Seafood and Kvika Banki 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 Iceland Seafood with a short position of Kvika Banki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iceland Seafood and Kvika Banki.

Diversification Opportunities for Iceland Seafood and Kvika Banki

0.77

Correlation Coefficient

Iceland Seafood  Kvika Banki

Poor diversification

The 3 months correlation between Iceland and Kvika is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Iceland Seafood International and Kvika banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kvika banki hf and Iceland Seafood 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 Iceland Seafood International are associated (or correlated) with Kvika Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kvika banki hf has no effect on the direction of Iceland Seafood i.e., Iceland Seafood and Kvika Banki go up and down completely randomly.

Pair Corralation between Iceland Seafood and Kvika Banki

Assuming the 90 days trading horizon Iceland Seafood International is expected to generate 1.74 times more return on investment than Kvika Banki. However, Iceland Seafood is 1.74 times more volatile than Kvika banki hf. It trades about 0.14 of its potential returns per unit of risk. Kvika banki hf is currently generating about 0.1 per unit of risk. If you would invest  460.00  in Iceland Seafood International on December 1, 2024 and sell it today you would earn a total of  68.00  from holding Iceland Seafood International or generate 14.78% return on investment over 90 days.

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

Iceland Seafood International  vs.  Kvika banki hf

Iceland Seafood Inte

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iceland Seafood International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, Iceland Seafood sustained solid returns over the last few months and may actually be approaching a breakup point.

Kvika banki hf

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kvika banki hf are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Kvika Banki is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Iceland Seafood and Kvika Banki

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

The idea behind Iceland Seafood International and Kvika banki hf 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.