Correlation Between Olav Thon and Kid ASA

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

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

Diversification Opportunities for Olav Thon and Kid ASA

0.64

Correlation Coefficient

Olav Thon  Kid ASA

Poor diversification

The 3 months correlation between Olav and Kid is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Olav Thon Eien and Kid ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kid ASA and Olav Thon 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 Olav Thon Eien are associated (or correlated) with Kid ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kid ASA has no effect on the direction of Olav Thon i.e., Olav Thon and Kid ASA go up and down completely randomly.

Pair Corralation between Olav Thon and Kid ASA

Assuming the 90 days trading horizon Olav Thon is expected to generate 2.94 times less return on investment than Kid ASA. But when comparing it to its historical volatility, Olav Thon Eien is 1.62 times less risky than Kid ASA. It trades about 0.15 of its potential returns per unit of risk. Kid ASA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  12,300  in Kid ASA on September 24, 2024 and sell it today you would earn a total of  1,020  from holding Kid ASA or generate 8.29% return on investment over 90 days.

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

Olav Thon Eien  vs.  Kid ASA

Olav Thon Eien

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Olav Thon and Kid ASA

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

The idea behind Olav Thon Eien and Kid ASA 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.