Correlation Between Kraft Bank and Norske Skog

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

Diversification Opportunities for Kraft Bank and Norske Skog

0.41

Correlation Coefficient

Kraft Bank  Norske Skog

Very weak diversification

The 3 months correlation between Kraft and Norske is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Bank Asa and Norske Skog Asa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norske Skog Asa 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 Norske Skog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norske Skog Asa has no effect on the direction of Kraft Bank i.e., Kraft Bank and Norske Skog go up and down completely randomly.

Pair Corralation between Kraft Bank and Norske Skog

Assuming the 90 days trading horizon Kraft Bank Asa is expected to generate 0.48 times more return on investment than Norske Skog. However, Kraft Bank Asa is 2.08 times less risky than Norske Skog. It trades about -0.07 of its potential returns per unit of risk. Norske Skog Asa is currently generating about -0.07 per unit of risk. If you would invest  920.00  in Kraft Bank Asa on October 26, 2024 and sell it today you would lose (80.00) from holding Kraft Bank Asa or give up 8.7% of portfolio value over 90 days.

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

Kraft Bank Asa  vs.  Norske Skog Asa

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 latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Norske Skog Asa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norske Skog Asa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Kraft Bank and Norske Skog

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

The idea behind Kraft Bank Asa and Norske Skog Asa 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.