Correlation Between Integrated Wind and Kongsberg Automotive

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

By analyzing existing cross correlation between Integrated Wind Solutions and Kongsberg Automotive Holding, you can compare the effects of market volatilities on Integrated Wind and Kongsberg Automotive 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 Integrated Wind with a short position of Kongsberg Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integrated Wind and Kongsberg Automotive.

Diversification Opportunities for Integrated Wind and Kongsberg Automotive

-0.16

Correlation Coefficient

Integrated Wind  Kongsberg Automotive

Good diversification

The 3 months correlation between Integrated and Kongsberg is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Wind Solutions and Kongsberg Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Automotive and Integrated Wind 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 Integrated Wind Solutions are associated (or correlated) with Kongsberg Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Automotive has no effect on the direction of Integrated Wind i.e., Integrated Wind and Kongsberg Automotive go up and down completely randomly.

Pair Corralation between Integrated Wind and Kongsberg Automotive

Assuming the 90 days trading horizon Integrated Wind Solutions is expected to under-perform the Kongsberg Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Integrated Wind Solutions is 1.66 times less risky than Kongsberg Automotive. The stock trades about -0.02 of its potential returns per unit of risk. The Kongsberg Automotive Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Kongsberg Automotive Holding on August 31, 2024 and sell it today you would earn a total of  12.00  from holding Kongsberg Automotive Holding or generate 8.7% return on investment over 90 days.

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

Integrated Wind Solutions  vs.  Kongsberg Automotive Holding

Integrated Wind Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kongsberg Automotive

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Automotive Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kongsberg Automotive may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Integrated Wind and Kongsberg Automotive

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

The idea behind Integrated Wind Solutions and Kongsberg Automotive Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.