Correlation Between K2 Gold and Energy Fuels
Can any of the company-specific risk be diversified away by investing in both K2 Gold and Energy Fuels 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 Gold and Energy Fuels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K2 Gold and Energy Fuels, you can compare the effects of market volatilities on K2 Gold and Energy Fuels 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 Gold with a short position of Energy Fuels. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Gold and Energy Fuels.
Diversification Opportunities for K2 Gold and Energy Fuels
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KTO and Energy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding K2 Gold and Energy Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Fuels and K2 Gold 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 Gold are associated (or correlated) with Energy Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fuels has no effect on the direction of K2 Gold i.e., K2 Gold and Energy Fuels go up and down completely randomly.
Pair Corralation between K2 Gold and Energy Fuels
Assuming the 90 days horizon K2 Gold is expected to generate 1.74 times less return on investment than Energy Fuels. In addition to that, K2 Gold is 2.28 times more volatile than Energy Fuels. It trades about 0.08 of its total potential returns per unit of risk. Energy Fuels is currently generating about 0.31 per unit of volatility. If you would invest 785.00 in Energy Fuels on September 5, 2024 and sell it today you would earn a total of 195.00 from holding Energy Fuels or generate 24.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Gold vs. Energy Fuels
Performance |
| Timeline |
| K2 Gold |
| Energy Fuels |
K2 Gold and Energy Fuels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Gold and Energy Fuels
The main advantage of trading using opposite K2 Gold and Energy Fuels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Gold position performs unexpectedly, Energy Fuels 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 Fuels will offset losses from the drop in Energy Fuels' long position.The idea behind K2 Gold and Energy Fuels 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 Fuels vs. Totally Hip Technologies | Energy Fuels vs. Data Communications Management | Energy Fuels vs. Rogers Communications | Energy Fuels vs. Firan Technology Group |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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