Correlation Between Kraft Bank and Deep Value

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

By analyzing existing cross correlation between Kraft Bank Asa and Deep Value Driller, you can compare the effects of market volatilities on Kraft Bank and Deep Value 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 Kraft Bank with a short position of Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Bank and Deep Value.

Diversification Opportunities for Kraft Bank and Deep Value

0.83

Correlation Coefficient

Kraft Bank  Deep Value

Very poor diversification

The 3 months correlation between Kraft and Deep is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Bank Asa and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller and Kraft Bank 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 Kraft Bank Asa are associated (or correlated) with Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Kraft Bank i.e., Kraft Bank and Deep Value go up and down completely randomly.

Pair Corralation between Kraft Bank and Deep Value

Assuming the 90 days trading horizon Kraft Bank is expected to generate 2.59 times less return on investment than Deep Value. In addition to that, Kraft Bank is 1.01 times more volatile than Deep Value Driller. It trades about 0.01 of its total potential returns per unit of risk. Deep Value Driller is currently generating about 0.04 per unit of volatility. If you would invest  1,305  in Deep Value Driller on October 11, 2024 and sell it today you would earn a total of  393.00  from holding Deep Value Driller or generate 30.11% return on investment over 90 days.

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

Kraft Bank Asa  vs.  Deep Value Driller

Kraft Bank Asa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Deep Value Driller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Value Driller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kraft Bank and Deep Value

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

The idea behind Kraft Bank Asa and Deep Value Driller 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.