Correlation Between K2 Asset and Pinnacle Investment
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Pinnacle Investment 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 Pinnacle Investment 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 Pinnacle Investment Management, you can compare the effects of market volatilities on K2 Asset and Pinnacle Investment 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 Pinnacle Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Pinnacle Investment.
Diversification Opportunities for K2 Asset and Pinnacle Investment
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAM and Pinnacle is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Pinnacle Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Investment 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 Pinnacle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Investment has no effect on the direction of K2 Asset i.e., K2 Asset and Pinnacle Investment go up and down completely randomly.
Pair Corralation between K2 Asset and Pinnacle Investment
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 2.8 times more return on investment than Pinnacle Investment. However, K2 Asset is 2.8 times more volatile than Pinnacle Investment Management. It trades about 0.34 of its potential returns per unit of risk. Pinnacle Investment Management is currently generating about 0.64 per unit of risk. If you would invest 5.00 in K2 Asset Management on August 29, 2024 and sell it today you would earn a total of 1.90 from holding K2 Asset Management or generate 38.0% 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. Pinnacle Investment Management
Performance |
| Timeline |
| K2 Asset Management |
| Pinnacle Investment |
K2 Asset and Pinnacle Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Pinnacle Investment
The main advantage of trading using opposite K2 Asset and Pinnacle Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Pinnacle Investment 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 Pinnacle Investment will offset losses from the drop in Pinnacle Investment's long position.| K2 Asset vs. Champion Iron | K2 Asset vs. Ridley | K2 Asset vs. Peel Mining | K2 Asset vs. Australian Dairy Farms |
| Pinnacle Investment vs. Champion Iron | Pinnacle Investment vs. Ridley | Pinnacle Investment vs. Peel Mining | Pinnacle Investment vs. Australian Dairy Farms |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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