Correlation Between K2 Asset and Future Generation
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Future Generation 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 Future Generation 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 Future Generation Australia, you can compare the effects of market volatilities on K2 Asset and Future Generation 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 Future Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Future Generation.
Diversification Opportunities for K2 Asset and Future Generation
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAM and Future is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Future Generation Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Generation 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 Future Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Generation has no effect on the direction of K2 Asset i.e., K2 Asset and Future Generation go up and down completely randomly.
Pair Corralation between K2 Asset and Future Generation
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 4.97 times more return on investment than Future Generation. However, K2 Asset is 4.97 times more volatile than Future Generation Australia. It trades about 0.03 of its potential returns per unit of risk. Future Generation Australia is currently generating about 0.07 per unit of risk. If you would invest 6.65 in K2 Asset Management on September 4, 2024 and sell it today you would earn a total of 0.35 from holding K2 Asset Management or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
K2 Asset Management vs. Future Generation Australia
Performance |
| Timeline |
| K2 Asset Management |
| Future Generation |
K2 Asset and Future Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Future Generation
The main advantage of trading using opposite K2 Asset and Future Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Future Generation 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 Future Generation will offset losses from the drop in Future Generation's long position.| K2 Asset vs. Westpac Banking | K2 Asset vs. Ecofibre | K2 Asset vs. Adriatic Metals Plc | K2 Asset vs. Australian Dairy Farms |
| Future Generation vs. Fisher Paykel Healthcare | Future Generation vs. Regal Investment | Future Generation vs. A1 Investments Resources | Future Generation vs. Hotel Property 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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