Correlation Between Investor and KebNi AB

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

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

Diversification Opportunities for Investor and KebNi AB

0.65

Correlation Coefficient

Investor  KebNi AB

Poor diversification

The 3 months correlation between Investor and KebNi is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and KebNi AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KebNi AB and Investor 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 Investor AB ser are associated (or correlated) with KebNi AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KebNi AB has no effect on the direction of Investor i.e., Investor and KebNi AB go up and down completely randomly.

Pair Corralation between Investor and KebNi AB

Assuming the 90 days trading horizon Investor AB ser is expected to under-perform the KebNi AB. But the stock apears to be less risky and, when comparing its historical volatility, Investor AB ser is 6.13 times less risky than KebNi AB. The stock trades about -0.13 of its potential returns per unit of risk. The KebNi AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  94.00  in KebNi AB on September 26, 2024 and sell it today you would earn a total of  14.00  from holding KebNi AB or generate 14.89% return on investment over 90 days.

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

Investor AB ser  vs.  KebNi AB

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KebNi AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KebNi AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Investor and KebNi AB

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

The idea behind Investor AB ser and KebNi 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.