Correlation Between River and Kinnevik Investment

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

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

Diversification Opportunities for River and Kinnevik Investment

-0.16

Correlation Coefficient

River  Kinnevik Investment

Good diversification

The 3 months correlation between River and Kinnevik is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and River 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 River and Mercantile 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 River i.e., River and Kinnevik Investment go up and down completely randomly.

Pair Corralation between River and Kinnevik Investment

Assuming the 90 days trading horizon River and Mercantile is expected to under-perform the Kinnevik Investment. But the stock apears to be less risky and, when comparing its historical volatility, River and Mercantile is 15.56 times less risky than Kinnevik Investment. The stock trades about -0.23 of its potential returns per unit of risk. The Kinnevik Investment AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,754  in Kinnevik Investment AB on October 6, 2024 and sell it today you would earn a total of  35.00  from holding Kinnevik Investment AB or generate 0.45% return on investment over 90 days.

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

River and Mercantile  vs.  Kinnevik Investment AB

River and Mercantile

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in River and Mercantile are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kinnevik Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with River and Kinnevik Investment

The main advantage of trading using opposite River and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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 River and Mercantile 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 Global Correlations module to find global opportunities by holding instruments from different markets.