Correlation Between Kid ASA and AF Gruppen

Can any of the company-specific risk be diversified away by investing in both Kid ASA and AF Gruppen 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 Kid ASA and AF Gruppen into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kid ASA and AF Gruppen

0.1

Correlation Coefficient

Kid ASA  AF Gruppen

Average diversification

The 3 months correlation between Kid and AFG is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Kid ASA and AF Gruppen ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AF Gruppen ASA and Kid ASA 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 Kid ASA are associated (or correlated) with AF Gruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AF Gruppen ASA has no effect on the direction of Kid ASA i.e., Kid ASA and AF Gruppen go up and down completely randomly.

Pair Corralation between Kid ASA and AF Gruppen

Assuming the 90 days trading horizon Kid ASA is expected to generate 1.11 times more return on investment than AF Gruppen. However, Kid ASA is 1.11 times more volatile than AF Gruppen ASA. It trades about 0.11 of its potential returns per unit of risk. AF Gruppen ASA is currently generating about -0.03 per unit of risk. If you would invest  13,400  in Kid ASA on December 27, 2024 and sell it today you would earn a total of  1,720  from holding Kid ASA or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Kid ASA  vs.  AF Gruppen ASA

Kid ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kid ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Kid ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

AF Gruppen ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days AF Gruppen ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, AF Gruppen is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kid ASA and AF Gruppen

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

The idea behind Kid ASA and AF Gruppen ASA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.