Correlation Between Prevas AB and Know IT

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

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

Diversification Opportunities for Prevas AB and Know IT

0.92

Correlation Coefficient

Prevas AB  Know IT

Almost no diversification

The 3 months correlation between Prevas and Know is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prevas AB and Know IT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know IT AB and Prevas AB 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 Prevas AB are associated (or correlated) with Know IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know IT AB has no effect on the direction of Prevas AB i.e., Prevas AB and Know IT go up and down completely randomly.

Pair Corralation between Prevas AB and Know IT

Assuming the 90 days trading horizon Prevas AB is expected to under-perform the Know IT. In addition to that, Prevas AB is 1.25 times more volatile than Know IT AB. It trades about -0.13 of its total potential returns per unit of risk. Know IT AB is currently generating about 0.01 per unit of volatility. If you would invest  14,383  in Know IT AB on September 5, 2024 and sell it today you would earn a total of  17.00  from holding Know IT AB or generate 0.12% return on investment over 90 days.

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

Prevas AB  vs.  Know IT AB

Prevas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prevas AB 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 technical and fundamental indicators 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.

Know IT AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know IT AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Prevas AB and Know IT

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

The idea behind Prevas AB and Know IT 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.