Correlation Between Euronext and Kko International

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

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

Diversification Opportunities for Euronext and Kko International

0.85

Correlation Coefficient

Euronext  Kko International

Very poor diversification

The 3 months correlation between Euronext and Kko is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Kko International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kko International and Euronext 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 Euronext NV are associated (or correlated) with Kko International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kko International has no effect on the direction of Euronext i.e., Euronext and Kko International go up and down completely randomly.

Pair Corralation between Euronext and Kko International

Assuming the 90 days trading horizon Euronext is expected to generate 18.73 times less return on investment than Kko International. But when comparing it to its historical volatility, Euronext NV is 11.58 times less risky than Kko International. It trades about 0.12 of its potential returns per unit of risk. Kko International SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4.68  in Kko International SA on September 24, 2024 and sell it today you would earn a total of  12.32  from holding Kko International SA or generate 263.25% return on investment over 90 days.

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

Euronext NV  vs.  Kko International SA

Euronext NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Euronext NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Euronext may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kko International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kko International SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kko International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euronext and Kko International

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

The idea behind Euronext NV and Kko International SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..