Correlation Between K2 Asset and EP Financial
Can any of the company-specific risk be diversified away by investing in both K2 Asset and EP Financial 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 EP Financial 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 EP Financial Group, you can compare the effects of market volatilities on K2 Asset and EP Financial 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 EP Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and EP Financial.
Diversification Opportunities for K2 Asset and EP Financial
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KAM and EP1 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and EP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EP Financial Group 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 EP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EP Financial Group has no effect on the direction of K2 Asset i.e., K2 Asset and EP Financial go up and down completely randomly.
Pair Corralation between K2 Asset and EP Financial
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 1.81 times more return on investment than EP Financial. However, K2 Asset is 1.81 times more volatile than EP Financial Group. It trades about 0.04 of its potential returns per unit of risk. EP Financial Group is currently generating about 0.02 per unit of risk. If you would invest 6.60 in K2 Asset Management on September 14, 2024 and sell it today you would earn a total of 1.10 from holding K2 Asset Management or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. EP Financial Group
Performance |
| Timeline |
| K2 Asset Management |
| EP Financial Group |
K2 Asset and EP Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and EP Financial
The main advantage of trading using opposite K2 Asset and EP Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, EP Financial 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 EP Financial will offset losses from the drop in EP Financial's long position.The idea behind K2 Asset Management and EP Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EP Financial vs. Audio Pixels Holdings | EP Financial vs. Iodm | EP Financial vs. Nsx | EP Financial vs. TTG Fintech |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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