Correlation Between K2 Asset and Metrics Master
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Metrics Master 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 Metrics Master 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 Metrics Master Income, you can compare the effects of market volatilities on K2 Asset and Metrics Master 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 Metrics Master. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Metrics Master.
Diversification Opportunities for K2 Asset and Metrics Master
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAM and Metrics is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Metrics Master Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrics Master Income 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 Metrics Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrics Master Income has no effect on the direction of K2 Asset i.e., K2 Asset and Metrics Master go up and down completely randomly.
Pair Corralation between K2 Asset and Metrics Master
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 11.16 times more return on investment than Metrics Master. However, K2 Asset is 11.16 times more volatile than Metrics Master Income. It trades about 0.06 of its potential returns per unit of risk. Metrics Master Income is currently generating about 0.06 per unit of risk. If you would invest 5.00 in K2 Asset Management on September 3, 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. Metrics Master Income
Performance |
| Timeline |
| K2 Asset Management |
| Metrics Master Income |
K2 Asset and Metrics Master Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Metrics Master
The main advantage of trading using opposite K2 Asset and Metrics Master positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Metrics Master 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 Metrics Master will offset losses from the drop in Metrics Master's long position.The idea behind K2 Asset Management and Metrics Master Income 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.| Metrics Master vs. Navigator Global Investments | Metrics Master vs. K2 Asset Management | Metrics Master vs. Mayfield Childcare | Metrics Master vs. Pinnacle Investment Management |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |