Correlation Between KABE Group and Real Heart

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

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

Diversification Opportunities for KABE Group and Real Heart

0.12

Correlation Coefficient

KABE Group  Real Heart

Average diversification

The 3 months correlation between KABE and Real is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Real Heart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Heart and KABE Group 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 KABE Group AB are associated (or correlated) with Real Heart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Heart has no effect on the direction of KABE Group i.e., KABE Group and Real Heart go up and down completely randomly.

Pair Corralation between KABE Group and Real Heart

Assuming the 90 days trading horizon KABE Group AB is expected to under-perform the Real Heart. But the stock apears to be less risky and, when comparing its historical volatility, KABE Group AB is 12.63 times less risky than Real Heart. The stock trades about -0.15 of its potential returns per unit of risk. The Real Heart is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,186  in Real Heart on December 30, 2024 and sell it today you would earn a total of  194.00  from holding Real Heart or generate 16.36% return on investment over 90 days.

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

KABE Group AB  vs.  Real Heart

KABE Group AB

Risk-Adjusted Performance

Very Weak

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

Real Heart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Real Heart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Real Heart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KABE Group and Real Heart

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

The idea behind KABE Group AB and Real Heart 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..