Correlation Between High Coast and KABE Group

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

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

Diversification Opportunities for High Coast and KABE Group

-0.15

Correlation Coefficient

High Coast  KABE Group

Good diversification

The 3 months correlation between High and KABE is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding High Coast Distillery 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 High Coast 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 High Coast Distillery 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 High Coast i.e., High Coast and KABE Group go up and down completely randomly.

Pair Corralation between High Coast and KABE Group

Assuming the 90 days trading horizon High Coast Distillery is expected to generate 1.92 times more return on investment than KABE Group. However, High Coast is 1.92 times more volatile than KABE Group AB. It trades about 0.08 of its potential returns per unit of risk. KABE Group AB is currently generating about -0.02 per unit of risk. If you would invest  4,000  in High Coast Distillery on September 13, 2024 and sell it today you would earn a total of  520.00  from holding High Coast Distillery or generate 13.0% return on investment over 90 days.

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

High Coast Distillery  vs.  KABE Group AB

High Coast Distillery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, High Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

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 High Coast and KABE Group

The main advantage of trading using opposite High Coast and KABE Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Coast 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 High Coast Distillery 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.