Correlation Between Kinnevik Investment and AB Traction

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

Diversification Opportunities for Kinnevik Investment and AB Traction

-0.14

Correlation Coefficient

Kinnevik Investment  AB Traction

Good diversification

The 3 months correlation between Kinnevik and TRAC-B is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and AB Traction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Traction 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 AB Traction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Traction has no effect on the direction of Kinnevik Investment i.e., Kinnevik Investment and AB Traction go up and down completely randomly.

Pair Corralation between Kinnevik Investment and AB Traction

Assuming the 90 days trading horizon Kinnevik Investment AB is expected to under-perform the AB Traction. In addition to that, Kinnevik Investment is 1.34 times more volatile than AB Traction. It trades about -0.08 of its total potential returns per unit of risk. AB Traction is currently generating about -0.07 per unit of volatility. If you would invest  27,800  in AB Traction on September 26, 2024 and sell it today you would lose (2,200) from holding AB Traction or give up 7.91% of portfolio value over 90 days.

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

Kinnevik Investment AB  vs.  AB Traction

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 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.

AB Traction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AB Traction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 AB Traction

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

The idea behind Kinnevik Investment AB and AB Traction 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 Channel module to use Commodity Channel Index to analyze current equity momentum.