Correlation Between Kvika Banki and Lgerin Egill

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Can any of the company-specific risk be diversified away by investing in both Kvika Banki and Lgerin Egill 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 Kvika Banki and Lgerin Egill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kvika banki hf and lgerin Egill Skallagrmsson, you can compare the effects of market volatilities on Kvika Banki and Lgerin Egill 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 Kvika Banki with a short position of Lgerin Egill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kvika Banki and Lgerin Egill.

Diversification Opportunities for Kvika Banki and Lgerin Egill

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Kvika and Lgerin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kvika banki hf and lgerin Egill Skallagrmsson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on lgerin Egill Skallag and Kvika Banki 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 Kvika banki hf are associated (or correlated) with Lgerin Egill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of lgerin Egill Skallag has no effect on the direction of Kvika Banki i.e., Kvika Banki and Lgerin Egill go up and down completely randomly.

Pair Corralation between Kvika Banki and Lgerin Egill

Assuming the 90 days trading horizon Kvika banki hf is expected to under-perform the Lgerin Egill. But the stock apears to be less risky and, when comparing its historical volatility, Kvika banki hf is 1.07 times less risky than Lgerin Egill. The stock trades about -0.02 of its potential returns per unit of risk. The lgerin Egill Skallagrmsson is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,730  in lgerin Egill Skallagrmsson on August 29, 2024 and sell it today you would earn a total of  60.00  from holding lgerin Egill Skallagrmsson or generate 3.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kvika banki hf  vs.  lgerin Egill Skallagrmsson

 Performance 
       Timeline  
Kvika banki hf 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Kvika banki hf are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Kvika Banki demonstrated solid returns over the last few months and may actually be approaching a breakup point.
lgerin Egill Skallag 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in lgerin Egill Skallagrmsson are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Lgerin Egill is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Kvika Banki and Lgerin Egill Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kvika Banki and Lgerin Egill

The main advantage of trading using opposite Kvika Banki and Lgerin Egill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kvika Banki position performs unexpectedly, Lgerin Egill 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 Lgerin Egill will offset losses from the drop in Lgerin Egill's long position.
The idea behind Kvika banki hf and lgerin Egill Skallagrmsson 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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