Correlation Between Byggma and Kid ASA

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

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

Diversification Opportunities for Byggma and Kid ASA

0.8

Correlation Coefficient

Byggma  Kid ASA

Very poor diversification

The 3 months correlation between Byggma and Kid is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Byggma and Kid ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid ASA and Byggma 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 Byggma are associated (or correlated) with Kid ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid ASA has no effect on the direction of Byggma i.e., Byggma and Kid ASA go up and down completely randomly.

Pair Corralation between Byggma and Kid ASA

Assuming the 90 days trading horizon Byggma is expected to under-perform the Kid ASA. In addition to that, Byggma is 1.59 times more volatile than Kid ASA. It trades about -0.07 of its total potential returns per unit of risk. Kid ASA is currently generating about -0.08 per unit of volatility. If you would invest  15,109  in Kid ASA on September 24, 2024 and sell it today you would lose (1,789) from holding Kid ASA or give up 11.84% of portfolio value over 90 days.

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

Byggma  vs.  Kid ASA

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kid ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Byggma and Kid ASA

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

The idea behind Byggma and Kid 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 Commodity Directory module to find actively traded commodities issued by global exchanges.