Correlation Between Leading Edge and KABE Group
Can any of the company-specific risk be diversified away by investing in both Leading Edge and KABE Group 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 Leading Edge and KABE Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and KABE Group AB, you can compare the effects of market volatilities on Leading Edge and KABE Group 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 Leading Edge with a short position of KABE Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and KABE Group.
Diversification Opportunities for Leading Edge and KABE Group
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leading and KABE is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and KABE Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KABE Group AB and Leading Edge 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 Leading Edge Materials are associated (or correlated) with KABE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KABE Group AB has no effect on the direction of Leading Edge i.e., Leading Edge and KABE Group go up and down completely randomly.
Pair Corralation between Leading Edge and KABE Group
Assuming the 90 days trading horizon Leading Edge Materials is expected to under-perform the KABE Group. In addition to that, Leading Edge is 2.4 times more volatile than KABE Group AB. It trades about 0.0 of its total potential returns per unit of risk. KABE Group AB is currently generating about 0.05 per unit of volatility. If you would invest 19,702 in KABE Group AB on August 28, 2024 and sell it today you would earn a total of 10,298 from holding KABE Group AB or generate 52.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Leading Edge Materials vs. KABE Group AB
Performance |
| Timeline |
| Leading Edge Materials |
| KABE Group AB |
Leading Edge and KABE Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and KABE Group
The main advantage of trading using opposite Leading Edge and KABE Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, KABE Group 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 KABE Group will offset losses from the drop in KABE Group's long position.| Leading Edge vs. Boliden AB | Leading Edge vs. KABE Group AB | Leading Edge vs. IAR Systems Group | Leading Edge vs. Norva24 Group AB |
| KABE Group vs. Awardit AB | KABE Group vs. RVRC Holding AB | KABE Group vs. Smart Eye AB | KABE Group vs. IAR Systems Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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