Correlation Between Know IT and Nederman Holding
Can any of the company-specific risk be diversified away by investing in both Know IT and Nederman Holding 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 Know IT and Nederman Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Know IT AB and Nederman Holding AB, you can compare the effects of market volatilities on Know IT and Nederman Holding 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 Know IT with a short position of Nederman Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know IT and Nederman Holding.
Diversification Opportunities for Know IT and Nederman Holding
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Know and Nederman is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and Nederman Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nederman Holding and Know IT 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 Know IT AB are associated (or correlated) with Nederman Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nederman Holding has no effect on the direction of Know IT i.e., Know IT and Nederman Holding go up and down completely randomly.
Pair Corralation between Know IT and Nederman Holding
Assuming the 90 days trading horizon Know IT AB is expected to under-perform the Nederman Holding. But the stock apears to be less risky and, when comparing its historical volatility, Know IT AB is 1.17 times less risky than Nederman Holding. The stock trades about -0.12 of its potential returns per unit of risk. The Nederman Holding AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 20,600 in Nederman Holding AB on September 1, 2024 and sell it today you would earn a total of 1,300 from holding Nederman Holding AB or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Know IT AB vs. Nederman Holding AB
Performance |
| Timeline |
| Know IT AB |
| Nederman Holding |
Know IT and Nederman Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Know IT and Nederman Holding
The main advantage of trading using opposite Know IT and Nederman Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Know IT position performs unexpectedly, Nederman Holding 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 Nederman Holding will offset losses from the drop in Nederman Holding's long position.The idea behind Know IT AB and Nederman Holding 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.| Nederman Holding vs. Fagerhult AB | Nederman Holding vs. Lindab International AB | Nederman Holding vs. Inwido AB | Nederman Holding vs. OEM International AB |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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