Correlation Between K2 Asset and Encounter Resources
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Encounter Resources 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 Encounter Resources 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 Encounter Resources, you can compare the effects of market volatilities on K2 Asset and Encounter Resources 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 Encounter Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Encounter Resources.
Diversification Opportunities for K2 Asset and Encounter Resources
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KAM and Encounter is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Encounter Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encounter Resources 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 Encounter Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encounter Resources has no effect on the direction of K2 Asset i.e., K2 Asset and Encounter Resources go up and down completely randomly.
Pair Corralation between K2 Asset and Encounter Resources
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 1.09 times more return on investment than Encounter Resources. However, K2 Asset is 1.09 times more volatile than Encounter Resources. It trades about 0.41 of its potential returns per unit of risk. Encounter Resources is currently generating about 0.02 per unit of risk. If you would invest 5.20 in K2 Asset Management on September 13, 2024 and sell it today you would earn a total of 2.50 from holding K2 Asset Management or generate 48.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. Encounter Resources
Performance |
| Timeline |
| K2 Asset Management |
| Encounter Resources |
K2 Asset and Encounter Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Encounter Resources
The main advantage of trading using opposite K2 Asset and Encounter Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Encounter Resources 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 Encounter Resources will offset losses from the drop in Encounter Resources' long position.| K2 Asset vs. Sky Metals | K2 Asset vs. Carnegie Clean Energy | K2 Asset vs. Hutchison Telecommunications | K2 Asset vs. MetalsGrove Mining |
| Encounter Resources vs. Alternative Investment Trust | Encounter Resources vs. Mirrabooka Investments | Encounter Resources vs. Premier Investments | Encounter Resources vs. REGAL ASIAN INVESTMENTS |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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