Correlation Between Knorr-Bremse Aktiengesellscha and Kongsberg Automotive
Can any of the company-specific risk be diversified away by investing in both Knorr-Bremse Aktiengesellscha and Kongsberg Automotive 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 Knorr-Bremse Aktiengesellscha and Kongsberg Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knorr Bremse Aktiengesellschaft and Kongsberg Automotive ASA, you can compare the effects of market volatilities on Knorr-Bremse Aktiengesellscha and Kongsberg Automotive 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 Knorr-Bremse Aktiengesellscha with a short position of Kongsberg Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knorr-Bremse Aktiengesellscha and Kongsberg Automotive.
Diversification Opportunities for Knorr-Bremse Aktiengesellscha and Kongsberg Automotive
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Knorr-Bremse and Kongsberg is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Knorr Bremse Aktiengesellschaf and Kongsberg Automotive ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kongsberg Automotive ASA and Knorr-Bremse Aktiengesellscha 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 Knorr Bremse Aktiengesellschaft are associated (or correlated) with Kongsberg Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kongsberg Automotive ASA has no effect on the direction of Knorr-Bremse Aktiengesellscha i.e., Knorr-Bremse Aktiengesellscha and Kongsberg Automotive go up and down completely randomly.
Pair Corralation between Knorr-Bremse Aktiengesellscha and Kongsberg Automotive
Assuming the 90 days horizon Knorr-Bremse Aktiengesellscha is expected to generate 20.28 times less return on investment than Kongsberg Automotive. But when comparing it to its historical volatility, Knorr Bremse Aktiengesellschaft is 7.53 times less risky than Kongsberg Automotive. It trades about 0.09 of its potential returns per unit of risk. Kongsberg Automotive ASA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Kongsberg Automotive ASA on October 25, 2024 and sell it today you would earn a total of 5.00 from holding Kongsberg Automotive ASA or generate 45.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knorr Bremse Aktiengesellschaf vs. Kongsberg Automotive ASA
Performance |
| Timeline |
| Knorr-Bremse Aktiengesellscha |
| Kongsberg Automotive ASA |
Knorr-Bremse Aktiengesellscha and Kongsberg Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knorr-Bremse Aktiengesellscha and Kongsberg Automotive
The main advantage of trading using opposite Knorr-Bremse Aktiengesellscha and Kongsberg Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knorr-Bremse Aktiengesellscha position performs unexpectedly, Kongsberg Automotive 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 Kongsberg Automotive will offset losses from the drop in Kongsberg Automotive's long position.The idea behind Knorr Bremse Aktiengesellschaft and Kongsberg Automotive 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.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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