Correlation Between K2 Gold and Loncor Resources
Can any of the company-specific risk be diversified away by investing in both K2 Gold and Loncor Resources 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 Loncor Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K2 Gold and Loncor Resources, you can compare the effects of market volatilities on K2 Gold and Loncor Resources 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 Loncor Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Gold and Loncor Resources.
Diversification Opportunities for K2 Gold and Loncor Resources
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KTO and Loncor is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding K2 Gold and Loncor Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncor Resources 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 Loncor Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncor Resources has no effect on the direction of K2 Gold i.e., K2 Gold and Loncor Resources go up and down completely randomly.
Pair Corralation between K2 Gold and Loncor Resources
Assuming the 90 days horizon K2 Gold is expected to generate 1.78 times more return on investment than Loncor Resources. However, K2 Gold is 1.78 times more volatile than Loncor Resources. It trades about 0.03 of its potential returns per unit of risk. Loncor Resources is currently generating about 0.03 per unit of risk. If you would invest 16.00 in K2 Gold on September 1, 2024 and sell it today you would lose (2.00) from holding K2 Gold or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
K2 Gold vs. Loncor Resources
Performance |
| Timeline |
| K2 Gold |
| Loncor Resources |
K2 Gold and Loncor Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K2 Gold and Loncor Resources
The main advantage of trading using opposite K2 Gold and Loncor Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Gold position performs unexpectedly, Loncor Resources 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 Loncor Resources will offset losses from the drop in Loncor Resources' long position.| K2 Gold vs. First Majestic Silver | K2 Gold vs. Ivanhoe Energy | K2 Gold vs. Orezone Gold Corp | K2 Gold vs. Faraday Copper Corp |
| Loncor Resources vs. First Majestic Silver | Loncor Resources vs. Ivanhoe Energy | Loncor Resources vs. Orezone Gold Corp | Loncor Resources vs. Faraday Copper Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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