Correlation Between Kitron ASA and Byggma

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

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

Diversification Opportunities for Kitron ASA and Byggma

-0.5

Correlation Coefficient

Kitron ASA  Byggma

Very good diversification

The 3 months correlation between Kitron and Byggma is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kitron ASA and Byggma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byggma and Kitron 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 Kitron ASA are associated (or correlated) with Byggma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byggma has no effect on the direction of Kitron ASA i.e., Kitron ASA and Byggma go up and down completely randomly.

Pair Corralation between Kitron ASA and Byggma

Assuming the 90 days trading horizon Kitron ASA is expected to generate 0.45 times more return on investment than Byggma. However, Kitron ASA is 2.2 times less risky than Byggma. It trades about 0.39 of its potential returns per unit of risk. Byggma is currently generating about 0.03 per unit of risk. If you would invest  3,028  in Kitron ASA on September 24, 2024 and sell it today you would earn a total of  400.00  from holding Kitron ASA or generate 13.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kitron ASA  vs.  Byggma

Kitron ASA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kitron ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kitron ASA and Byggma

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

The idea behind Kitron ASA and Byggma 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..