Correlation Between Kid ASA and Olav Thon

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

By analyzing existing cross correlation between Kid ASA and Olav Thon Eien, you can compare the effects of market volatilities on Kid ASA and Olav Thon 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 Olav Thon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kid ASA and Olav Thon.

Diversification Opportunities for Kid ASA and Olav Thon

-0.01

Correlation Coefficient

Kid ASA  Olav Thon

Good diversification

The 3 months correlation between Kid and Olav is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kid ASA and Olav Thon Eien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olav Thon Eien 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 Olav Thon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olav Thon Eien has no effect on the direction of Kid ASA i.e., Kid ASA and Olav Thon go up and down completely randomly.

Pair Corralation between Kid ASA and Olav Thon

Assuming the 90 days trading horizon Kid ASA is expected to generate 1.55 times more return on investment than Olav Thon. However, Kid ASA is 1.55 times more volatile than Olav Thon Eien. It trades about 0.12 of its potential returns per unit of risk. Olav Thon Eien is currently generating about 0.16 per unit of risk. If you would invest  13,400  in Kid ASA on December 28, 2024 and sell it today you would earn a total of  1,880  from holding Kid ASA or generate 14.03% return on investment over 90 days.

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

Kid ASA  vs.  Olav Thon Eien

Kid ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kid ASA are ranked lower than 9 (%) 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.

Olav Thon Eien

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Olav Thon Eien are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Olav Thon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kid ASA and Olav Thon

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

The idea behind Kid ASA and Olav Thon Eien 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.