Correlation Between Kid ASA and Polaris Media

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

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

Diversification Opportunities for Kid ASA and Polaris Media

-0.84

Correlation Coefficient

Kid ASA  Polaris Media

Pay attention - limited upside

The 3 months correlation between Kid and Polaris is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kid ASA and Polaris Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Media 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 Polaris Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Media has no effect on the direction of Kid ASA i.e., Kid ASA and Polaris Media go up and down completely randomly.

Pair Corralation between Kid ASA and Polaris Media

Assuming the 90 days trading horizon Kid ASA is expected to under-perform the Polaris Media. But the stock apears to be less risky and, when comparing its historical volatility, Kid ASA is 1.36 times less risky than Polaris Media. The stock trades about -0.08 of its potential returns per unit of risk. The Polaris Media is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,550  in Polaris Media on September 12, 2024 and sell it today you would earn a total of  1,200  from holding Polaris Media or generate 15.89% return on investment over 90 days.

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

Kid ASA  vs.  Polaris Media

Kid ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Polaris Media

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Polaris Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kid ASA and Polaris Media

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

The idea behind Kid ASA and Polaris Media 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.