Correlation Between Marel Hf and Kvika Banki

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

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

Diversification Opportunities for Marel Hf and Kvika Banki

0.52

Correlation Coefficient

Marel Hf  Kvika Banki

Very weak diversification

The 3 months correlation between Marel and Kvika is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Marel hf and Kvika banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kvika banki hf and Marel Hf 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 Marel hf are associated (or correlated) with Kvika Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kvika banki hf has no effect on the direction of Marel Hf i.e., Marel Hf and Kvika Banki go up and down completely randomly.

Pair Corralation between Marel Hf and Kvika Banki

Assuming the 90 days trading horizon Marel hf is expected to under-perform the Kvika Banki. In addition to that, Marel Hf is 3.51 times more volatile than Kvika banki hf. It trades about -0.02 of its total potential returns per unit of risk. Kvika banki hf is currently generating about 0.7 per unit of volatility. If you would invest  1,885  in Kvika banki hf on October 7, 2024 and sell it today you would earn a total of  195.00  from holding Kvika banki hf or generate 10.34% return on investment over 90 days.

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

Marel hf  vs.  Kvika banki hf

Marel hf

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marel hf are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Marel Hf demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kvika banki hf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kvika banki hf are ranked lower than 13 (%) 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.

Pair Trading with Marel Hf and Kvika Banki

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

The idea behind Marel hf and Kvika banki 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.