Correlation Between Kongsberg Gruppen and Tekna Holding

Can any of the company-specific risk be diversified away by investing in both Kongsberg Gruppen and Tekna Holding 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 Kongsberg Gruppen and Tekna Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kongsberg Gruppen ASA and Tekna Holding AS, you can compare the effects of market volatilities on Kongsberg Gruppen and Tekna Holding 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 Kongsberg Gruppen with a short position of Tekna Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kongsberg Gruppen and Tekna Holding.

Diversification Opportunities for Kongsberg Gruppen and Tekna Holding

0.17

Correlation Coefficient

Kongsberg Gruppen  Tekna Holding

Average diversification

The 3 months correlation between Kongsberg and Tekna is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Gruppen ASA and Tekna Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekna Holding AS and Kongsberg Gruppen 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 Kongsberg Gruppen ASA are associated (or correlated) with Tekna Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekna Holding AS has no effect on the direction of Kongsberg Gruppen i.e., Kongsberg Gruppen and Tekna Holding go up and down completely randomly.

Pair Corralation between Kongsberg Gruppen and Tekna Holding

Assuming the 90 days trading horizon Kongsberg Gruppen is expected to generate 4.03 times less return on investment than Tekna Holding. But when comparing it to its historical volatility, Kongsberg Gruppen ASA is 2.46 times less risky than Tekna Holding. It trades about 0.1 of its potential returns per unit of risk. Tekna Holding AS is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Tekna Holding AS on December 30, 2024 and sell it today you would earn a total of  275.00  from holding Tekna Holding AS or generate 84.62% return on investment over 90 days.

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

Kongsberg Gruppen ASA  vs.  Tekna Holding AS

Kongsberg Gruppen ASA

Risk-Adjusted Performance

OK

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

Tekna Holding AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tekna Holding AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Tekna Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kongsberg Gruppen and Tekna Holding

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

The idea behind Kongsberg Gruppen ASA and Tekna Holding AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.