Correlation Between KABE Group and Transtema Group

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

Diversification Opportunities for KABE Group and Transtema Group

0.16

Correlation Coefficient

KABE Group  Transtema Group

Average diversification

The 3 months correlation between KABE and Transtema is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Transtema Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transtema Group 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 Transtema Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transtema Group AB has no effect on the direction of KABE Group i.e., KABE Group and Transtema Group go up and down completely randomly.

Pair Corralation between KABE Group and Transtema Group

Assuming the 90 days trading horizon KABE Group AB is expected to generate 0.63 times more return on investment than Transtema Group. However, KABE Group AB is 1.59 times less risky than Transtema Group. It trades about 0.05 of its potential returns per unit of risk. Transtema Group AB is currently generating about -0.05 per unit of risk. If you would invest  20,127  in KABE Group AB on October 10, 2024 and sell it today you would earn a total of  10,473  from holding KABE Group AB or generate 52.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

KABE Group AB  vs.  Transtema Group AB

KABE Group AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KABE Group AB are ranked lower than 1 (%) 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.

Transtema Group AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transtema Group AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Transtema Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KABE Group and Transtema Group

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

The idea behind KABE Group AB and Transtema Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.