Correlation Between AF Gruppen and Kitron ASA

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

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

Diversification Opportunities for AF Gruppen and Kitron ASA

-0.11

Correlation Coefficient

AF Gruppen  Kitron ASA

Good diversification

The 3 months correlation between AFG and Kitron is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding AF Gruppen ASA and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and AF Gruppen 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 AF Gruppen ASA are associated (or correlated) with Kitron ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kitron ASA has no effect on the direction of AF Gruppen i.e., AF Gruppen and Kitron ASA go up and down completely randomly.

Pair Corralation between AF Gruppen and Kitron ASA

Assuming the 90 days trading horizon AF Gruppen is expected to generate 2.64 times less return on investment than Kitron ASA. But when comparing it to its historical volatility, AF Gruppen ASA is 1.53 times less risky than Kitron ASA. It trades about 0.01 of its potential returns per unit of risk. Kitron ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,617  in Kitron ASA on January 31, 2024 and sell it today you would earn a total of  275.00  from holding Kitron ASA or generate 10.51% return on investment over 90 days.

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

AF Gruppen ASA  vs.  Kitron ASA

AF Gruppen ASA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AF Gruppen ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, AF Gruppen disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kitron ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kitron ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic 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 AF Gruppen and Kitron ASA

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

The idea behind AF Gruppen ASA and Kitron 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.