Correlation Between ISEQ 20 and KLP AksjeGlobal

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Can any of the company-specific risk be diversified away by investing in both ISEQ 20 and KLP AksjeGlobal 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 ISEQ 20 and KLP AksjeGlobal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ISEQ 20 Price and KLP AksjeGlobal Indeks, you can compare the effects of market volatilities on ISEQ 20 and KLP AksjeGlobal 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 ISEQ 20 with a short position of KLP AksjeGlobal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ISEQ 20 and KLP AksjeGlobal.

Diversification Opportunities for ISEQ 20 and KLP AksjeGlobal

-0.37

Correlation Coefficient

ISEQ 20

KLP AksjeGlobal

Very good diversification

The 3 months correlation between ISEQ and KLP is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ISEQ 20 Price and KLP AksjeGlobal Indeks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLP AksjeGlobal Indeks and ISEQ 20 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 ISEQ 20 Price are associated (or correlated) with KLP AksjeGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLP AksjeGlobal Indeks has no effect on the direction of ISEQ 20 i.e., ISEQ 20 and KLP AksjeGlobal go up and down completely randomly.

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Pair Corralation between ISEQ 20 and KLP AksjeGlobal

Assuming the 90 days trading horizon ISEQ 20 Price is expected to under-perform the KLP AksjeGlobal. But the index apears to be less risky and, when comparing its historical volatility, ISEQ 20 Price is 1.01 times less risky than KLP AksjeGlobal. The index trades about -0.11 of its potential returns per unit of risk. The KLP AksjeGlobal Indeks is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 332,014 in KLP AksjeGlobal Indeks on September 4, 2024 and sell it today you would earn a total of 14,695 from holding KLP AksjeGlobal Indeks or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

ISEQ 20 Price vs. KLP AksjeGlobal Indeks

Performance

Timeline

ISEQ 20 and KLP AksjeGlobal Volatility Contrast

Predicted Return Density

Returns

ISEQ 20 Price

Pair trading matchups for ISEQ 20

	ISEQ 20 vs. Bank of Ireland
	ISEQ 20 vs. Cairn Homes PLC
	ISEQ 20 vs. Datalex
	ISEQ 20 vs. Ryanair Holdings plc

KLP AksjeGlobal Indeks

Pair trading matchups for KLP AksjeGlobal

	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Dalata Hotel Group

Pair Trading with ISEQ 20 and KLP AksjeGlobal

The main advantage of trading using opposite ISEQ 20 and KLP AksjeGlobal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ISEQ 20 position performs unexpectedly, KLP AksjeGlobal 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 KLP AksjeGlobal will offset losses from the drop in KLP AksjeGlobal's long position.

	ISEQ 20 vs. Bank of Ireland
	ISEQ 20 vs. Cairn Homes PLC
	ISEQ 20 vs. Datalex
	ISEQ 20 vs. Ryanair Holdings plc

The idea behind ISEQ 20 Price and KLP AksjeGlobal Indeks 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.

	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Franklin Floating Rate
	KLP AksjeGlobal vs. Dalata Hotel Group

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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