Correlation Between KABE Group and Prevas AB

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

Diversification Opportunities for KABE Group and Prevas AB

0.22

Correlation Coefficient

KABE Group  Prevas AB

Modest diversification

The 3 months correlation between KABE and Prevas is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Prevas AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prevas 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 Prevas AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prevas AB has no effect on the direction of KABE Group i.e., KABE Group and Prevas AB go up and down completely randomly.

Pair Corralation between KABE Group and Prevas AB

Assuming the 90 days trading horizon KABE Group is expected to generate 1.6 times less return on investment than Prevas AB. But when comparing it to its historical volatility, KABE Group AB is 1.59 times less risky than Prevas AB. It trades about 0.23 of its potential returns per unit of risk. Prevas AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  11,120  in Prevas AB on October 8, 2024 and sell it today you would earn a total of  600.00  from holding Prevas AB or generate 5.4% return on investment over 90 days.

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

KABE Group AB  vs.  Prevas AB

KABE Group AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KABE Group AB are ranked lower than 2 (%) 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.

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Prevas AB 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 Prevas AB

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

The idea behind KABE Group AB and Prevas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.