Correlation Between Investor and Kinnevik Investment

Can any of the company-specific risk be diversified away by investing in both Investor 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 Investor and Kinnevik Investment 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 Kinnevik Investment AB, you can compare the effects of market volatilities on Investor 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 Investor with a short position of Kinnevik Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Kinnevik Investment.

Diversification Opportunities for Investor and Kinnevik Investment

0.88

Correlation Coefficient

Investor  Kinnevik Investment

Very poor diversification

The 3 months correlation between Investor and Kinnevik is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 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 Investor i.e., Investor and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Investor and Kinnevik Investment

Assuming the 90 days trading horizon Investor is expected to generate 2.89 times less return on investment than Kinnevik Investment. But when comparing it to its historical volatility, Investor AB ser is 2.16 times less risky than Kinnevik Investment. It trades about 0.1 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,750  in Kinnevik Investment AB on December 1, 2024 and sell it today you would earn a total of  1,323  from holding Kinnevik Investment AB or generate 17.07% return on investment over 90 days.

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

Investor AB ser  vs.  Kinnevik Investment AB

Investor AB ser

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Investor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kinnevik Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investor and Kinnevik Investment

The main advantage of trading using opposite Investor and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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 Investor AB ser 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.