Correlation Between KABE Group and Malmbergs Elektriska

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

Diversification Opportunities for KABE Group and Malmbergs Elektriska

0.21

Correlation Coefficient

KABE Group  Malmbergs Elektriska

Modest diversification

The 3 months correlation between KABE and Malmbergs is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Malmbergs Elektriska AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malmbergs Elektriska 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 Malmbergs Elektriska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malmbergs Elektriska has no effect on the direction of KABE Group i.e., KABE Group and Malmbergs Elektriska go up and down completely randomly.

Pair Corralation between KABE Group and Malmbergs Elektriska

Assuming the 90 days trading horizon KABE Group AB is expected to under-perform the Malmbergs Elektriska. In addition to that, KABE Group is 1.01 times more volatile than Malmbergs Elektriska AB. It trades about -0.08 of its total potential returns per unit of risk. Malmbergs Elektriska AB is currently generating about -0.02 per unit of volatility. If you would invest  4,170  in Malmbergs Elektriska AB on September 2, 2024 and sell it today you would lose (120.00) from holding Malmbergs Elektriska AB or give up 2.88% of portfolio value over 90 days.

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

KABE Group AB  vs.  Malmbergs Elektriska AB

KABE Group AB

Risk-Adjusted Performance

0 of 100

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.

Malmbergs Elektriska

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KABE Group and Malmbergs Elektriska

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

The idea behind KABE Group AB and Malmbergs Elektriska 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.