Correlation Between Byggma and Kitron ASA

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

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

Diversification Opportunities for Byggma and Kitron ASA

-0.5

Correlation Coefficient

Byggma  Kitron ASA

Very good diversification

The 3 months correlation between Byggma and Kitron is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Byggma and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron 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 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 Byggma i.e., Byggma and Kitron ASA go up and down completely randomly.

Pair Corralation between Byggma and Kitron ASA

Assuming the 90 days trading horizon Byggma is expected to under-perform the Kitron ASA. In addition to that, Byggma is 2.18 times more volatile than Kitron ASA. It trades about -0.07 of its total potential returns per unit of risk. Kitron ASA is currently generating about 0.13 per unit of volatility. If you would invest  2,938  in Kitron ASA on September 24, 2024 and sell it today you would earn a total of  382.00  from holding Kitron ASA or generate 13.0% return on investment over 90 days.

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

Byggma  vs.  Kitron 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.

Kitron ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Byggma and Kitron ASA

The main advantage of trading using opposite Byggma and Kitron ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Byggma 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 Byggma 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.