Correlation Between K2 Asset and Champion Iron
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Champion Iron 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 Champion Iron 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 Champion Iron, you can compare the effects of market volatilities on K2 Asset and Champion Iron 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 Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Champion Iron.
Diversification Opportunities for K2 Asset and Champion Iron
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between KAM and Champion is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of K2 Asset i.e., K2 Asset and Champion Iron go up and down completely randomly.
Pair Corralation between K2 Asset and Champion Iron
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 1.73 times more return on investment than Champion Iron. However, K2 Asset is 1.73 times more volatile than Champion Iron. It trades about 0.11 of its potential returns per unit of risk. Champion Iron is currently generating about -0.11 per unit of risk. If you would invest 7.10 in K2 Asset Management on November 3, 2024 and sell it today you would earn a total of 0.60 from holding K2 Asset Management or generate 8.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. Champion Iron
Performance |
| Timeline |
| K2 Asset Management |
| Champion Iron |
K2 Asset and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Champion Iron
The main advantage of trading using opposite K2 Asset and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| K2 Asset vs. Phoslock Environmental Technologies | K2 Asset vs. Computershare | K2 Asset vs. Medibank Private | K2 Asset vs. Tombador Iron |
| Champion Iron vs. Auswide Bank | Champion Iron vs. Step One Clothing | Champion Iron vs. Qbe Insurance Group | Champion Iron vs. Liberty 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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