Correlation Between K2 Asset and Collins Foods
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Collins Foods 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 Collins Foods 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 Collins Foods, you can compare the effects of market volatilities on K2 Asset and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Collins Foods.
Diversification Opportunities for K2 Asset and Collins Foods
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KAM and Collins is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of K2 Asset i.e., K2 Asset and Collins Foods go up and down completely randomly.
Pair Corralation between K2 Asset and Collins Foods
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 5.79 times more return on investment than Collins Foods. However, K2 Asset is 5.79 times more volatile than Collins Foods. It trades about 0.37 of its potential returns per unit of risk. Collins Foods is currently generating about 0.17 per unit of risk. If you would invest 5.00 in K2 Asset Management on September 1, 2024 and sell it today you would earn a total of 2.00 from holding K2 Asset Management or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. Collins Foods
Performance |
| Timeline |
| K2 Asset Management |
| Collins Foods |
K2 Asset and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Collins Foods
The main advantage of trading using opposite K2 Asset and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| K2 Asset vs. WA1 Resources | K2 Asset vs. Predictive Discovery | K2 Asset vs. Cooper Metals | K2 Asset vs. OD6 Metals |
| Collins Foods vs. iShares Global Healthcare | Collins Foods vs. Australian Dairy Farms | Collins Foods vs. Adriatic Metals Plc | Collins Foods vs. Australian Agricultural |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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