Correlation Between KABE Group and Nordic Iron

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

Diversification Opportunities for KABE Group and Nordic Iron

-0.28

Correlation Coefficient

KABE Group  Nordic Iron

Very good diversification

The 3 months correlation between KABE and Nordic is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Nordic Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Iron Ore 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 Nordic Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Iron Ore has no effect on the direction of KABE Group i.e., KABE Group and Nordic Iron go up and down completely randomly.

Pair Corralation between KABE Group and Nordic Iron

Assuming the 90 days trading horizon KABE Group AB is expected to under-perform the Nordic Iron. But the stock apears to be less risky and, when comparing its historical volatility, KABE Group AB is 2.59 times less risky than Nordic Iron. The stock trades about -0.15 of its potential returns per unit of risk. The Nordic Iron Ore is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  474.00  in Nordic Iron Ore on December 30, 2024 and sell it today you would earn a total of  41.00  from holding Nordic Iron Ore or generate 8.65% return on investment over 90 days.

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

KABE Group AB  vs.  Nordic Iron Ore

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.

Nordic Iron Ore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Iron Ore are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nordic Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KABE Group and Nordic Iron

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

The idea behind KABE Group AB and Nordic Iron Ore 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.