Correlation Between K2 Asset and Energy Resources
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Energy 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 Energy 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 Energy Resources, you can compare the effects of market volatilities on K2 Asset and Energy 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 Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Energy Resources.
Diversification Opportunities for K2 Asset and Energy Resources
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KAM and Energy is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy 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 Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of K2 Asset i.e., K2 Asset and Energy Resources go up and down completely randomly.
Pair Corralation between K2 Asset and Energy Resources
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 0.3 times more return on investment than Energy Resources. However, K2 Asset Management is 3.32 times less risky than Energy Resources. It trades about 0.08 of its potential returns per unit of risk. Energy Resources is currently generating about 0.01 per unit of risk. If you would invest 4.70 in K2 Asset Management on September 3, 2024 and sell it today you would earn a total of 2.30 from holding K2 Asset Management or generate 48.94% 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. Energy Resources
Performance |
| Timeline |
| K2 Asset Management |
| Energy Resources |
K2 Asset and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Energy Resources
The main advantage of trading using opposite K2 Asset and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Energy 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 Energy Resources will offset losses from the drop in Energy Resources' long position.The idea behind K2 Asset Management and Energy Resources 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.| Energy Resources vs. Macquarie Bank Limited | Energy Resources vs. National Australia Bank | Energy Resources vs. Retail Food Group | Energy Resources vs. G8 Education |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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