Correlation Between Wallenstam and Kinnevik Investment

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

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

Diversification Opportunities for Wallenstam and Kinnevik Investment

0.58

Correlation Coefficient

Wallenstam  Kinnevik Investment

Very weak diversification

The 3 months correlation between Wallenstam and Kinnevik is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wallenstam AB and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Wallenstam 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 Wallenstam AB 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 Wallenstam i.e., Wallenstam and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Wallenstam and Kinnevik Investment

Assuming the 90 days trading horizon Wallenstam AB is expected to under-perform the Kinnevik Investment. But the stock apears to be less risky and, when comparing its historical volatility, Wallenstam AB is 1.33 times less risky than Kinnevik Investment. The stock trades about -0.05 of its potential returns per unit of risk. The Kinnevik Investment AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,551  in Kinnevik Investment AB on September 4, 2024 and sell it today you would earn a total of  199.00  from holding Kinnevik Investment AB or generate 2.64% return on investment over 90 days.

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

Wallenstam AB  vs.  Kinnevik Investment AB

Wallenstam AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wallenstam AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Wallenstam is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Kinnevik Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kinnevik Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wallenstam and Kinnevik Investment

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