Correlation Between Kvika Banki and Slandsbanki

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

By analyzing existing cross correlation between Kvika banki hf and slandsbanki hf, you can compare the effects of market volatilities on Kvika Banki and Slandsbanki 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 Kvika Banki with a short position of Slandsbanki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kvika Banki and Slandsbanki.

Diversification Opportunities for Kvika Banki and Slandsbanki

0.92

Correlation Coefficient

Kvika Banki  Slandsbanki

Almost no diversification

The 3 months correlation between Kvika and Slandsbanki is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Kvika banki hf and slandsbanki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on slandsbanki hf and Kvika Banki 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 Kvika banki hf are associated (or correlated) with Slandsbanki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of slandsbanki hf has no effect on the direction of Kvika Banki i.e., Kvika Banki and Slandsbanki go up and down completely randomly.

Pair Corralation between Kvika Banki and Slandsbanki

Assuming the 90 days trading horizon Kvika Banki is expected to generate 1.61 times less return on investment than Slandsbanki. But when comparing it to its historical volatility, Kvika banki hf is 1.34 times less risky than Slandsbanki. It trades about 0.22 of its potential returns per unit of risk. slandsbanki hf is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  9,960  in slandsbanki hf on September 5, 2024 and sell it today you would earn a total of  2,540  from holding slandsbanki hf or generate 25.5% return on investment over 90 days.

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

Kvika banki hf  vs.  slandsbanki hf

Kvika banki hf

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kvika banki hf are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Kvika Banki demonstrated solid returns over the last few months and may actually be approaching a breakup point.

slandsbanki hf

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in slandsbanki hf are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Slandsbanki exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kvika Banki and Slandsbanki

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

The idea behind Kvika banki hf and slandsbanki hf 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.