Correlation Between KABE Group and USWE Sports

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

Diversification Opportunities for KABE Group and USWE Sports

-0.36

Correlation Coefficient

KABE Group  USWE Sports

Very good diversification

The 3 months correlation between KABE and USWE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and USWE Sports AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE Sports 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 USWE Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE Sports AB has no effect on the direction of KABE Group i.e., KABE Group and USWE Sports go up and down completely randomly.

Pair Corralation between KABE Group and USWE Sports

Assuming the 90 days trading horizon KABE Group is expected to generate 1.49 times less return on investment than USWE Sports. But when comparing it to its historical volatility, KABE Group AB is 2.31 times less risky than USWE Sports. It trades about 0.11 of its potential returns per unit of risk. USWE Sports AB is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  890.00  in USWE Sports AB on October 5, 2024 and sell it today you would earn a total of  20.00  from holding USWE Sports AB or generate 2.25% 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.  USWE Sports AB

KABE Group AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days KABE Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

USWE Sports AB

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days USWE Sports AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, USWE Sports unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KABE Group and USWE Sports

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

The idea behind KABE Group AB and USWE Sports 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.