Correlation Between Kvika Banki and Marel Hf

Can any of the company-specific risk be diversified away by investing in both Kvika Banki and Marel Hf 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 Marel Hf 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 Marel hf, you can compare the effects of market volatilities on Kvika Banki and Marel Hf 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 Marel Hf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kvika Banki and Marel Hf.

Diversification Opportunities for Kvika Banki and Marel Hf

0.58

Correlation Coefficient

Kvika Banki  Marel Hf

Very weak diversification

The 3 months correlation between Kvika and Marel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kvika banki hf and Marel hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marel 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 Marel Hf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marel hf has no effect on the direction of Kvika Banki i.e., Kvika Banki and Marel Hf go up and down completely randomly.

Pair Corralation between Kvika Banki and Marel Hf

Assuming the 90 days trading horizon Kvika Banki is expected to generate 1.51 times less return on investment than Marel Hf. But when comparing it to its historical volatility, Kvika banki hf is 1.55 times less risky than Marel Hf. It trades about 0.02 of its potential returns per unit of risk. Marel hf is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  53,176  in Marel hf on October 22, 2024 and sell it today you would earn a total of  7,824  from holding Marel hf or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.96%
Values	Daily Returns

Kvika banki hf  vs.  Marel hf

Kvika banki hf

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kvika banki hf are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Kvika Banki may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Marel hf

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Marel hf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak forward indicators, Marel Hf demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kvika Banki and Marel Hf

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

The idea behind Kvika banki hf and Marel 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.