Correlation Between Kinnevik Investment and Ratos AB

Can any of the company-specific risk be diversified away by investing in both Kinnevik Investment and Ratos AB 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 Ratos AB 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 Ratos AB, you can compare the effects of market volatilities on Kinnevik Investment and Ratos AB 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 Ratos AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinnevik Investment and Ratos AB.

Diversification Opportunities for Kinnevik Investment and Ratos AB

0.51

Correlation Coefficient

Kinnevik Investment  Ratos AB

Very weak diversification

The 3 months correlation between Kinnevik and Ratos is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos AB 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 Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of Kinnevik Investment i.e., Kinnevik Investment and Ratos AB go up and down completely randomly.

Pair Corralation between Kinnevik Investment and Ratos AB

Assuming the 90 days trading horizon Kinnevik Investment AB is expected to generate 0.84 times more return on investment than Ratos AB. However, Kinnevik Investment AB is 1.19 times less risky than Ratos AB. It trades about 0.03 of its potential returns per unit of risk. Ratos AB is currently generating about 0.02 per unit of risk. If you would invest  7,551  in Kinnevik Investment AB on September 4, 2024 and sell it today you would earn a total of  199.00  from holding Kinnevik Investment AB or generate 2.64% return on investment over 90 days.

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

Kinnevik Investment AB  vs.  Ratos AB

Kinnevik Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Ratos AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ratos AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinnevik Investment and Ratos AB

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

The idea behind Kinnevik Investment AB and Ratos 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.