Correlation Between KABE Group and MAG Interactive

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

Diversification Opportunities for KABE Group and MAG Interactive

0.49

Correlation Coefficient

KABE Group  MAG Interactive

Very weak diversification

The 3 months correlation between KABE and MAG is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and MAG Interactive AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Interactive AB 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 MAG Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Interactive AB has no effect on the direction of KABE Group i.e., KABE Group and MAG Interactive go up and down completely randomly.

Pair Corralation between KABE Group and MAG Interactive

Assuming the 90 days trading horizon KABE Group is expected to generate 7.35 times less return on investment than MAG Interactive. But when comparing it to its historical volatility, KABE Group AB is 3.19 times less risky than MAG Interactive. It trades about 0.05 of its potential returns per unit of risk. MAG Interactive AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  765.00  in MAG Interactive AB on November 20, 2024 and sell it today you would earn a total of  177.00  from holding MAG Interactive AB or generate 23.14% return on investment over 90 days.

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

KABE Group AB  vs.  MAG Interactive AB

KABE Group AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KABE Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

MAG Interactive AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Interactive AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAG Interactive unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KABE Group and MAG Interactive

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

The idea behind KABE Group AB and MAG Interactive 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.