Correlation Between KebNi AB and Freemelt Holding

Can any of the company-specific risk be diversified away by investing in both KebNi AB and Freemelt Holding 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 KebNi AB and Freemelt Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KebNi AB and Freemelt Holding AB, you can compare the effects of market volatilities on KebNi AB and Freemelt Holding 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 KebNi AB with a short position of Freemelt Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of KebNi AB and Freemelt Holding.

Diversification Opportunities for KebNi AB and Freemelt Holding

0.68

Correlation Coefficient

KebNi AB  Freemelt Holding

Poor diversification

The 3 months correlation between KebNi and Freemelt is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KebNi AB and Freemelt Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freemelt Holding and KebNi AB 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 KebNi AB are associated (or correlated) with Freemelt Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freemelt Holding has no effect on the direction of KebNi AB i.e., KebNi AB and Freemelt Holding go up and down completely randomly.

Pair Corralation between KebNi AB and Freemelt Holding

Assuming the 90 days trading horizon KebNi AB is expected to generate 0.42 times more return on investment than Freemelt Holding. However, KebNi AB is 2.36 times less risky than Freemelt Holding. It trades about -0.05 of its potential returns per unit of risk. Freemelt Holding AB is currently generating about -0.12 per unit of risk. If you would invest  126.00  in KebNi AB on September 25, 2024 and sell it today you would lose (18.00) from holding KebNi AB or give up 14.29% of portfolio value over 90 days.

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

KebNi AB  vs.  Freemelt Holding AB

KebNi AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KebNi AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Freemelt Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freemelt Holding AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KebNi AB and Freemelt Holding

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

The idea behind KebNi AB and Freemelt Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.