Correlation Between Kitron ASA and Polaris Media

Can any of the company-specific risk be diversified away by investing in both Kitron 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 Kitron 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 Kitron ASA and Polaris Media, you can compare the effects of market volatilities on Kitron 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 Kitron ASA with a short position of Polaris Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kitron ASA and Polaris Media.

Diversification Opportunities for Kitron ASA and Polaris Media

-0.16

Correlation Coefficient

Kitron ASA  Polaris Media

Good diversification

The 3 months correlation between Kitron and Polaris is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kitron ASA and Polaris Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Media and Kitron 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 Kitron 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 Kitron ASA i.e., Kitron ASA and Polaris Media go up and down completely randomly.

Pair Corralation between Kitron ASA and Polaris Media

Assuming the 90 days trading horizon Kitron ASA is expected to under-perform the Polaris Media. But the stock apears to be less risky and, when comparing its historical volatility, Kitron ASA is 1.63 times less risky than Polaris Media. The stock trades about -0.02 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  7,250  in Polaris Media on September 5, 2024 and sell it today you would earn a total of  1,250  from holding Polaris Media or generate 17.24% return on investment over 90 days.

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

Kitron ASA  vs.  Polaris Media

Kitron ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kitron ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kitron ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Polaris Media

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Media are ranked lower than 8 (%) 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 Kitron ASA and Polaris Media

The main advantage of trading using opposite Kitron ASA and Polaris Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kitron 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 Kitron 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.