Correlation Between Footway Group and KABE Group

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

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

Diversification Opportunities for Footway Group and KABE Group

0.05

Correlation Coefficient

Footway Group  KABE Group

Significant diversification

The 3 months correlation between Footway and KABE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Footway Group AB and KABE Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KABE Group AB and Footway Group 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 Footway Group AB are associated (or correlated) with KABE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KABE Group AB has no effect on the direction of Footway Group i.e., Footway Group and KABE Group go up and down completely randomly.

Pair Corralation between Footway Group and KABE Group

Assuming the 90 days trading horizon Footway Group AB is expected to under-perform the KABE Group. In addition to that, Footway Group is 2.2 times more volatile than KABE Group AB. It trades about -0.14 of its total potential returns per unit of risk. KABE Group AB is currently generating about -0.03 per unit of volatility. If you would invest  31,204  in KABE Group AB on September 12, 2024 and sell it today you would lose (1,304) from holding KABE Group AB or give up 4.18% of portfolio value over 90 days.

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

Footway Group AB  vs.  KABE Group AB

Footway Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Footway Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

KABE Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Footway Group and KABE Group

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

The idea behind Footway Group AB and KABE Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.