Correlation Between Kinnevik Investment and Norion Bank

Can any of the company-specific risk be diversified away by investing in both Kinnevik Investment and Norion Bank 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 Kinnevik Investment and Norion Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kinnevik Investment and Norion Bank

0.48

Correlation Coefficient

Kinnevik Investment  Norion Bank

Very weak diversification

The 3 months correlation between Kinnevik and Norion is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank and Kinnevik Investment 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 Kinnevik Investment AB are associated (or correlated) with Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of Kinnevik Investment i.e., Kinnevik Investment and Norion Bank go up and down completely randomly.

Pair Corralation between Kinnevik Investment and Norion Bank

Assuming the 90 days trading horizon Kinnevik Investment AB is expected to generate 0.93 times more return on investment than Norion Bank. However, Kinnevik Investment AB is 1.08 times less risky than Norion Bank. It trades about -0.06 of its potential returns per unit of risk. Norion Bank is currently generating about -0.08 per unit of risk. If you would invest  8,094  in Kinnevik Investment AB on October 9, 2024 and sell it today you would lose (190.00) from holding Kinnevik Investment AB or give up 2.35% of portfolio value over 90 days.

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

Kinnevik Investment AB  vs.  Norion Bank

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kinnevik Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Kinnevik Investment and Norion Bank

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

The idea behind Kinnevik Investment AB and Norion Bank 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.