Correlation Between Power Metal and Kinnevik Investment

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

By analyzing existing cross correlation between Power Metal Resources and Kinnevik Investment AB, you can compare the effects of market volatilities on Power Metal and Kinnevik Investment 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 Power Metal with a short position of Kinnevik Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Kinnevik Investment.

Diversification Opportunities for Power Metal and Kinnevik Investment

-0.07

Correlation Coefficient

Power Metal  Kinnevik Investment

Good diversification

The 3 months correlation between Power and Kinnevik is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Power Metal 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 Power Metal Resources are associated (or correlated) with Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Power Metal i.e., Power Metal and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Power Metal and Kinnevik Investment

Assuming the 90 days trading horizon Power Metal Resources is expected to under-perform the Kinnevik Investment. In addition to that, Power Metal is 1.39 times more volatile than Kinnevik Investment AB. It trades about -0.05 of its total potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.14 per unit of volatility. If you would invest  7,588  in Kinnevik Investment AB on November 29, 2024 and sell it today you would earn a total of  1,220  from holding Kinnevik Investment AB or generate 16.08% return on investment over 90 days.

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

Power Metal Resources  vs.  Kinnevik Investment AB

Power Metal Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Metal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kinnevik Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kinnevik Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Metal and Kinnevik Investment

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

The idea behind Power Metal Resources and Kinnevik Investment 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.