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

0.62

Correlation Coefficient

Investor  Kinnevik Investment

Poor diversification

The 3 months correlation between Investor and Kinnevik is 0.62. 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 AB ser is expected to under-perform the Kinnevik Investment. But the stock apears to be less risky and, when comparing its historical volatility, Investor AB ser is 2.47 times less risky than Kinnevik Investment. The stock trades about -0.02 of its potential returns per unit of risk. The Kinnevik Investment AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7,783  in Kinnevik Investment AB on September 3, 2024 and sell it today you would lose (204.00) from holding Kinnevik Investment AB or give up 2.62% of portfolio value over 90 days.

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

Investor AB ser  vs.  Kinnevik Investment 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 somewhat strong basic indicators, Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kinnevik Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.