Correlation Between Lyko Group and KABE Group

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

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

Diversification Opportunities for Lyko Group and KABE Group

0.33

Correlation Coefficient

Lyko Group  KABE Group

Weak diversification

The 3 months correlation between Lyko and KABE is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lyko Group A and KABE Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KABE Group AB and Lyko 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 Lyko Group A are associated (or correlated) with KABE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KABE Group AB has no effect on the direction of Lyko Group i.e., Lyko Group and KABE Group go up and down completely randomly.

Pair Corralation between Lyko Group and KABE Group

Assuming the 90 days trading horizon Lyko Group A is expected to under-perform the KABE Group. In addition to that, Lyko Group is 1.84 times more volatile than KABE Group AB. It trades about -0.16 of its total potential returns per unit of risk. KABE Group AB is currently generating about -0.1 per unit of volatility. If you would invest  32,487  in KABE Group AB on September 4, 2024 and sell it today you would lose (3,687) from holding KABE Group AB or give up 11.35% of portfolio value over 90 days.

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

Lyko Group A  vs.  KABE Group AB

Lyko Group A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyko Group A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest uncertain performance, the Stock's fundamental drivers 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 Lyko Group and KABE Group

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

The idea behind Lyko Group A and KABE Group 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.