Correlation Between K2 Asset and Australian Critical
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Australian Critical 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 K2 Asset and Australian Critical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K2 Asset Management and Australian Critical Minerals, you can compare the effects of market volatilities on K2 Asset and Australian Critical 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 K2 Asset with a short position of Australian Critical. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Australian Critical.
Diversification Opportunities for K2 Asset and Australian Critical
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between KAM and Australian is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Australian Critical Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Critical and K2 Asset 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 K2 Asset Management are associated (or correlated) with Australian Critical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Critical has no effect on the direction of K2 Asset i.e., K2 Asset and Australian Critical go up and down completely randomly.
Pair Corralation between K2 Asset and Australian Critical
Assuming the 90 days trading horizon K2 Asset Management is expected to under-perform the Australian Critical. But the stock apears to be less risky and, when comparing its historical volatility, K2 Asset Management is 1.03 times less risky than Australian Critical. The stock trades about -0.33 of its potential returns per unit of risk. The Australian Critical Minerals is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 9.10 in Australian Critical Minerals on October 25, 2024 and sell it today you would lose (0.30) from holding Australian Critical Minerals or give up 3.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
K2 Asset Management vs. Australian Critical Minerals
Performance |
| Timeline |
| K2 Asset Management |
| Australian Critical |
K2 Asset and Australian Critical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Australian Critical
The main advantage of trading using opposite K2 Asset and Australian Critical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Australian Critical 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 Australian Critical will offset losses from the drop in Australian Critical's long position.| K2 Asset vs. Kneomedia | K2 Asset vs. ARN Media Limited | K2 Asset vs. Aristocrat Leisure | K2 Asset vs. Collins Foods |
| Australian Critical vs. Saferoads Holdings | Australian Critical vs. Centaurus Metals | Australian Critical vs. Cleanaway Waste Management | Australian Critical vs. Bell Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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