Correlation Between Kreditbanken and Alefarm Brewing

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

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

Diversification Opportunities for Kreditbanken and Alefarm Brewing

0.29

Correlation Coefficient

Kreditbanken  Alefarm Brewing

Modest diversification

The 3 months correlation between Kreditbanken and Alefarm is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kreditbanken AS and Alefarm Brewing AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alefarm Brewing AS and Kreditbanken 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 Kreditbanken AS are associated (or correlated) with Alefarm Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alefarm Brewing AS has no effect on the direction of Kreditbanken i.e., Kreditbanken and Alefarm Brewing go up and down completely randomly.

Pair Corralation between Kreditbanken and Alefarm Brewing

Assuming the 90 days trading horizon Kreditbanken AS is expected to generate 0.28 times more return on investment than Alefarm Brewing. However, Kreditbanken AS is 3.56 times less risky than Alefarm Brewing. It trades about -0.01 of its potential returns per unit of risk. Alefarm Brewing AS is currently generating about -0.05 per unit of risk. If you would invest  505,000  in Kreditbanken AS on September 3, 2024 and sell it today you would lose (5,000) from holding Kreditbanken AS or give up 0.99% of portfolio value over 90 days.

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

Kreditbanken AS  vs.  Alefarm Brewing AS

Kreditbanken AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alefarm Brewing AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alefarm Brewing AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kreditbanken and Alefarm Brewing

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

The idea behind Kreditbanken AS and Alefarm Brewing 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 Stocks Directory module to find actively traded stocks across global markets.