Correlation Between K2 Asset and Red Hill
Can any of the company-specific risk be diversified away by investing in both K2 Asset and Red Hill 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 Red Hill 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 Red Hill Iron, you can compare the effects of market volatilities on K2 Asset and Red Hill 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 Red Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Red Hill.
Diversification Opportunities for K2 Asset and Red Hill
Almost no diversification
The 3 months correlation between KAM and Red is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Red Hill Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Hill Iron 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 Red Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Hill Iron has no effect on the direction of K2 Asset i.e., K2 Asset and Red Hill go up and down completely randomly.
Pair Corralation between K2 Asset and Red Hill
Assuming the 90 days trading horizon K2 Asset Management is expected to generate 1.81 times more return on investment than Red Hill. However, K2 Asset is 1.81 times more volatile than Red Hill Iron. It trades about 0.05 of its potential returns per unit of risk. Red Hill Iron is currently generating about 0.03 per unit of risk. If you would invest 3.97 in K2 Asset Management on October 16, 2024 and sell it today you would earn a total of 3.13 from holding K2 Asset Management or generate 78.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Asset Management vs. Red Hill Iron
Performance |
| Timeline |
| K2 Asset Management |
| Red Hill Iron |
K2 Asset and Red Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Asset and Red Hill
The main advantage of trading using opposite K2 Asset and Red Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Red Hill 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 Red Hill will offset losses from the drop in Red Hill's long position.| K2 Asset vs. oOhMedia | K2 Asset vs. Auctus Alternative Investments | K2 Asset vs. Diversified United Investment | K2 Asset vs. Hotel Property Investments |
| Red Hill vs. K2 Asset Management | Red Hill vs. Queste Communications | Red Hill vs. Charter Hall Retail | Red Hill vs. Cleanaway Waste 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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