Correlation Between Napatech and Kitron ASA

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

By analyzing existing cross correlation between Napatech AS and Kitron ASA, you can compare the effects of market volatilities on Napatech and Kitron ASA 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 Napatech with a short position of Kitron ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Napatech and Kitron ASA.

Diversification Opportunities for Napatech and Kitron ASA

0.15

Correlation Coefficient

Napatech  Kitron ASA

Average diversification

The 3 months correlation between Napatech and Kitron is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Napatech AS and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and Napatech 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 Napatech AS are associated (or correlated) with Kitron ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kitron ASA has no effect on the direction of Napatech i.e., Napatech and Kitron ASA go up and down completely randomly.

Pair Corralation between Napatech and Kitron ASA

Assuming the 90 days trading horizon Napatech AS is expected to under-perform the Kitron ASA. In addition to that, Napatech is 1.67 times more volatile than Kitron ASA. It trades about -0.06 of its total potential returns per unit of risk. Kitron ASA is currently generating about 0.23 per unit of volatility. If you would invest  3,258  in Kitron ASA on December 4, 2024 and sell it today you would earn a total of  1,094  from holding Kitron ASA or generate 33.58% return on investment over 90 days.

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

Napatech AS  vs.  Kitron ASA

Napatech AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Napatech AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kitron ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Napatech and Kitron ASA

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

The idea behind Napatech AS and Kitron 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.