Correlation Between Bouvet and Kitron ASA
Can any of the company-specific risk be diversified away by investing in both Bouvet 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 Bouvet and Kitron ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bouvet and Kitron ASA, you can compare the effects of market volatilities on Bouvet 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 Bouvet with a short position of Kitron ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bouvet and Kitron ASA.
Diversification Opportunities for Bouvet and Kitron ASA
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bouvet and Kitron is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bouvet and Kitron ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kitron ASA and Bouvet 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 Bouvet 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 Bouvet i.e., Bouvet and Kitron ASA go up and down completely randomly.
Pair Corralation between Bouvet and Kitron ASA
Assuming the 90 days trading horizon Bouvet is expected to generate 0.66 times more return on investment than Kitron ASA. However, Bouvet is 1.5 times less risky than Kitron ASA. It trades about 0.05 of its potential returns per unit of risk. Kitron ASA is currently generating about 0.03 per unit of risk. If you would invest 5,301 in Bouvet on September 4, 2024 and sell it today you would earn a total of 1,879 from holding Bouvet or generate 35.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bouvet vs. Kitron ASA
Performance |
| Timeline |
| Bouvet |
| Kitron ASA |
Bouvet and Kitron ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bouvet and Kitron ASA
The main advantage of trading using opposite Bouvet and Kitron ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bouvet 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 Bouvet 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.| Kitron ASA vs. Elliptic Laboratories AS | Kitron ASA vs. Kongsberg Automotive Holding | Kitron ASA vs. REC Silicon ASA | Kitron ASA vs. Elkem ASA |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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