Correlation Between KLP Aksje and FD Technologies

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

By analyzing existing cross correlation between KLP Aksje Fremvoksende and FD Technologies PLC, you can compare the effects of market volatilities on KLP Aksje and FD Technologies 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 KLP Aksje with a short position of FD Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLP Aksje and FD Technologies.

Diversification Opportunities for KLP Aksje and FD Technologies

0.12

Correlation Coefficient

KLP Aksje  FD Technologies

Average diversification

The 3 months correlation between KLP and GYQ is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding KLP Aksje Fremvoksende and FD Technologies PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FD Technologies PLC and KLP Aksje 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 KLP Aksje Fremvoksende are associated (or correlated) with FD Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FD Technologies PLC has no effect on the direction of KLP Aksje i.e., KLP Aksje and FD Technologies go up and down completely randomly.

Pair Corralation between KLP Aksje and FD Technologies

Assuming the 90 days trading horizon KLP Aksje Fremvoksende is expected to generate 0.3 times more return on investment than FD Technologies. However, KLP Aksje Fremvoksende is 3.33 times less risky than FD Technologies. It trades about 0.1 of its potential returns per unit of risk. FD Technologies PLC is currently generating about 0.03 per unit of risk. If you would invest  145,790  in KLP Aksje Fremvoksende on September 21, 2024 and sell it today you would earn a total of  35,152  from holding KLP Aksje Fremvoksende or generate 24.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

KLP Aksje Fremvoksende  vs.  FD Technologies PLC

KLP Aksje Fremvoksende

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KLP Aksje Fremvoksende are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, KLP Aksje may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FD Technologies PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FD Technologies PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FD Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KLP Aksje and FD Technologies

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

The idea behind KLP Aksje Fremvoksende and FD Technologies PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.