Correlation Between Kid ASA and Schibsted ASA

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

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

Diversification Opportunities for Kid ASA and Schibsted ASA

-0.72

Correlation Coefficient

Kid ASA  Schibsted ASA

Pay attention - limited upside

The 3 months correlation between Kid and Schibsted is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kid ASA and Schibsted ASA A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schibsted ASA A and Kid ASA 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 Kid ASA are associated (or correlated) with Schibsted ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schibsted ASA A has no effect on the direction of Kid ASA i.e., Kid ASA and Schibsted ASA go up and down completely randomly.

Pair Corralation between Kid ASA and Schibsted ASA

Assuming the 90 days trading horizon Kid ASA is expected to under-perform the Schibsted ASA. In addition to that, Kid ASA is 1.16 times more volatile than Schibsted ASA A. It trades about -0.1 of its total potential returns per unit of risk. Schibsted ASA A is currently generating about 0.03 per unit of volatility. If you would invest  33,920  in Schibsted ASA A on September 23, 2024 and sell it today you would earn a total of  980.00  from holding Schibsted ASA A or generate 2.89% return on investment over 90 days.

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

Kid ASA  vs.  Schibsted ASA A

Kid ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kid ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Schibsted ASA A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schibsted ASA A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Schibsted ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kid ASA and Schibsted ASA

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

The idea behind Kid ASA and Schibsted ASA A 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.