Correlation Between Kongsberg Automotive and Everfuel

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

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

Diversification Opportunities for Kongsberg Automotive and Everfuel

0.23

Correlation Coefficient

Kongsberg Automotive  Everfuel

Modest diversification

The 3 months correlation between Kongsberg and Everfuel is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Automotive Holding and Everfuel AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everfuel AS and Kongsberg Automotive 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 Kongsberg Automotive Holding are associated (or correlated) with Everfuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everfuel AS has no effect on the direction of Kongsberg Automotive i.e., Kongsberg Automotive and Everfuel go up and down completely randomly.

Pair Corralation between Kongsberg Automotive and Everfuel

Assuming the 90 days trading horizon Kongsberg Automotive is expected to generate 3.29 times less return on investment than Everfuel. But when comparing it to its historical volatility, Kongsberg Automotive Holding is 1.5 times less risky than Everfuel. It trades about 0.02 of its potential returns per unit of risk. Everfuel AS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,070  in Everfuel AS on September 15, 2024 and sell it today you would earn a total of  222.00  from holding Everfuel AS or generate 20.75% return on investment over 90 days.

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

Kongsberg Automotive Holding  vs.  Everfuel AS

Kongsberg Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kongsberg Automotive Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kongsberg Automotive is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Everfuel AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everfuel AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Everfuel is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kongsberg Automotive and Everfuel

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

The idea behind Kongsberg Automotive Holding and Everfuel AS 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 Transaction History module to view history of all your transactions and understand their impact on performance.