Correlation Between KABE Group and Boliden AB

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

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

Diversification Opportunities for KABE Group and Boliden AB

-0.51

Correlation Coefficient

KABE Group  Boliden AB

Excellent diversification

The 3 months correlation between KABE and Boliden is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group AB and Boliden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB and KABE 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 KABE Group AB are associated (or correlated) with Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB has no effect on the direction of KABE Group i.e., KABE Group and Boliden AB go up and down completely randomly.

Pair Corralation between KABE Group and Boliden AB

Assuming the 90 days trading horizon KABE Group AB is expected to under-perform the Boliden AB. But the stock apears to be less risky and, when comparing its historical volatility, KABE Group AB is 1.16 times less risky than Boliden AB. The stock trades about -0.06 of its potential returns per unit of risk. The Boliden AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  29,360  in Boliden AB on September 3, 2024 and sell it today you would earn a total of  3,180  from holding Boliden AB or generate 10.83% return on investment over 90 days.

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

KABE Group AB  vs.  Boliden AB

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.

Boliden AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Boliden AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KABE Group and Boliden AB

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

The idea behind KABE Group AB and Boliden 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.