Correlation Between REC Silicon and Kitron ASA

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

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

Diversification Opportunities for REC Silicon and Kitron ASA

-0.49

Correlation Coefficient

REC Silicon  Kitron ASA

Very good diversification

The 3 months correlation between REC and Kitron is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and REC Silicon 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 REC Silicon ASA 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 REC Silicon i.e., REC Silicon and Kitron ASA go up and down completely randomly.

Pair Corralation between REC Silicon and Kitron ASA

Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the Kitron ASA. In addition to that, REC Silicon is 3.68 times more volatile than Kitron ASA. It trades about -0.12 of its total potential returns per unit of risk. Kitron ASA is currently generating about 0.18 per unit of volatility. If you would invest  3,382  in Kitron ASA on December 30, 2024 and sell it today you would earn a total of  1,042  from holding Kitron ASA or generate 30.81% return on investment over 90 days.

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

REC Silicon ASA  vs.  Kitron ASA

REC Silicon ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kitron ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 14 (%) 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 REC Silicon and Kitron ASA

The main advantage of trading using opposite REC Silicon and Kitron ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC Silicon 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 REC Silicon ASA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.