Correlation Between KABE Group and High Coast

Can any of the company-specific risk be diversified away by investing in both KABE Group and High Coast 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 High Coast 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 High Coast Distillery, you can compare the effects of market volatilities on KABE Group and High Coast 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 High Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of KABE Group and High Coast.

Diversification Opportunities for KABE Group and High Coast

-0.3

Correlation Coefficient

KABE Group  High Coast

Very good diversification

The 3 months correlation between KABE and High is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and High Coast Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Coast Distillery 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 High Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Coast Distillery has no effect on the direction of KABE Group i.e., KABE Group and High Coast go up and down completely randomly.

Pair Corralation between KABE Group and High Coast

Assuming the 90 days trading horizon KABE Group AB is expected to under-perform the High Coast. But the stock apears to be less risky and, when comparing its historical volatility, KABE Group AB is 1.62 times less risky than High Coast. The stock trades about -0.3 of its potential returns per unit of risk. The High Coast Distillery is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,420  in High Coast Distillery on December 1, 2024 and sell it today you would lose (120.00) from holding High Coast Distillery or give up 2.71% of portfolio value over 90 days.

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

KABE Group AB  vs.  High Coast Distillery

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 somewhat strong fundamental drivers, KABE Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

High Coast Distillery

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KABE Group and High Coast

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

The idea behind KABE Group AB and High Coast Distillery 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.