Correlation Between Carnegie Clean and WA Kaolin
Can any of the company-specific risk be diversified away by investing in both Carnegie Clean and WA Kaolin 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 Carnegie Clean and WA Kaolin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carnegie Clean Energy and WA Kaolin, you can compare the effects of market volatilities on Carnegie Clean and WA Kaolin 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 Carnegie Clean with a short position of WA Kaolin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and WA Kaolin.
Diversification Opportunities for Carnegie Clean and WA Kaolin
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Carnegie and WAK is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and WA Kaolin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WA Kaolin and Carnegie Clean 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 Carnegie Clean Energy are associated (or correlated) with WA Kaolin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WA Kaolin has no effect on the direction of Carnegie Clean i.e., Carnegie Clean and WA Kaolin go up and down completely randomly.
Pair Corralation between Carnegie Clean and WA Kaolin
Assuming the 90 days trading horizon Carnegie Clean Energy is expected to under-perform the WA Kaolin. But the stock apears to be less risky and, when comparing its historical volatility, Carnegie Clean Energy is 1.44 times less risky than WA Kaolin. The stock trades about -0.04 of its potential returns per unit of risk. The WA Kaolin is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 9.60 in WA Kaolin on September 14, 2024 and sell it today you would lose (3.90) from holding WA Kaolin or give up 40.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Carnegie Clean Energy vs. WA Kaolin
Performance |
| Timeline |
| Carnegie Clean Energy |
| WA Kaolin |
Carnegie Clean and WA Kaolin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carnegie Clean and WA Kaolin
The main advantage of trading using opposite Carnegie Clean and WA Kaolin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean position performs unexpectedly, WA Kaolin 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 WA Kaolin will offset losses from the drop in WA Kaolin's long position.| Carnegie Clean vs. Macquarie Group | Carnegie Clean vs. Rio Tinto | Carnegie Clean vs. CSL | Carnegie Clean vs. Commonwealth Bank of |
| WA Kaolin vs. Seven West Media | WA Kaolin vs. Environmental Clean Technologies | WA Kaolin vs. oOhMedia | WA Kaolin vs. Chalice Mining Limited |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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