Correlation Between Modern Times and KebNi AB

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

By analyzing existing cross correlation between Modern Times Group and KebNi AB, you can compare the effects of market volatilities on Modern Times and KebNi AB 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 Modern Times with a short position of KebNi AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Modern Times and KebNi AB.

Diversification Opportunities for Modern Times and KebNi AB

-0.56

Correlation Coefficient

Modern Times  KebNi AB

Excellent diversification

The 3 months correlation between Modern and KebNi is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Modern Times Group and KebNi AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KebNi AB and Modern Times 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 Modern Times Group are associated (or correlated) with KebNi AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KebNi AB has no effect on the direction of Modern Times i.e., Modern Times and KebNi AB go up and down completely randomly.

Pair Corralation between Modern Times and KebNi AB

Assuming the 90 days trading horizon Modern Times is expected to generate 1.22 times less return on investment than KebNi AB. But when comparing it to its historical volatility, Modern Times Group is 1.49 times less risky than KebNi AB. It trades about 0.02 of its potential returns per unit of risk. KebNi AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  110.00  in KebNi AB on September 26, 2024 and sell it today you would lose (2.00) from holding KebNi AB or give up 1.82% of portfolio value over 90 days.

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

Modern Times Group  vs.  KebNi AB

Modern Times Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Modern Times Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Modern Times unveiled solid returns over the last few months and may actually be approaching a breakup point.

KebNi AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KebNi AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Modern Times and KebNi AB

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

The idea behind Modern Times Group and KebNi AB 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.