Correlation Between K2A Knaust and Hufvudstaden

Can any of the company-specific risk be diversified away by investing in both K2A Knaust and Hufvudstaden 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 K2A Knaust and Hufvudstaden into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2A Knaust Andersson and Hufvudstaden AB, you can compare the effects of market volatilities on K2A Knaust and Hufvudstaden 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 K2A Knaust with a short position of Hufvudstaden. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2A Knaust and Hufvudstaden.

Diversification Opportunities for K2A Knaust and Hufvudstaden

0.65

Correlation Coefficient

K2A Knaust  Hufvudstaden

Poor diversification

The 3 months correlation between K2A and Hufvudstaden is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding K2A Knaust Andersson and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB and K2A Knaust 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 K2A Knaust Andersson are associated (or correlated) with Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of K2A Knaust i.e., K2A Knaust and Hufvudstaden go up and down completely randomly.

Pair Corralation between K2A Knaust and Hufvudstaden

Assuming the 90 days trading horizon K2A Knaust Andersson is expected to under-perform the Hufvudstaden. In addition to that, K2A Knaust is 3.08 times more volatile than Hufvudstaden AB. It trades about -0.12 of its total potential returns per unit of risk. Hufvudstaden AB is currently generating about -0.05 per unit of volatility. If you would invest  11,818  in Hufvudstaden AB on December 30, 2024 and sell it today you would lose (448.00) from holding Hufvudstaden AB or give up 3.79% of portfolio value over 90 days.

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

K2A Knaust Andersson  vs.  Hufvudstaden AB

K2A Knaust Andersson

Risk-Adjusted Performance

Very Weak

Over the last 90 days K2A Knaust Andersson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hufvudstaden AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with K2A Knaust and Hufvudstaden

The main advantage of trading using opposite K2A Knaust and Hufvudstaden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2A Knaust position performs unexpectedly, Hufvudstaden 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 Hufvudstaden will offset losses from the drop in Hufvudstaden's long position.

The idea behind K2A Knaust Andersson and Hufvudstaden 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.