Correlation Between Vulcan Steel and K2 Asset
Can any of the company-specific risk be diversified away by investing in both Vulcan Steel and K2 Asset 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 Vulcan Steel and K2 Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vulcan Steel and K2 Asset Management, you can compare the effects of market volatilities on Vulcan Steel and K2 Asset 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 Vulcan Steel with a short position of K2 Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Steel and K2 Asset.
Diversification Opportunities for Vulcan Steel and K2 Asset
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vulcan and KAM is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Steel and K2 Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Asset Management and Vulcan Steel 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 Vulcan Steel are associated (or correlated) with K2 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Asset Management has no effect on the direction of Vulcan Steel i.e., Vulcan Steel and K2 Asset go up and down completely randomly.
Pair Corralation between Vulcan Steel and K2 Asset
Assuming the 90 days trading horizon Vulcan Steel is expected to generate 6.05 times less return on investment than K2 Asset. But when comparing it to its historical volatility, Vulcan Steel is 2.12 times less risky than K2 Asset. It trades about 0.02 of its potential returns per unit of risk. K2 Asset Management is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vulcan Steel vs. K2 Asset Management
Performance |
| Timeline |
| Vulcan Steel |
| K2 Asset Management |
Vulcan Steel and K2 Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vulcan Steel and K2 Asset
The main advantage of trading using opposite Vulcan Steel and K2 Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Steel position performs unexpectedly, K2 Asset 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 K2 Asset will offset losses from the drop in K2 Asset's long position.| Vulcan Steel vs. Northern Star Resources | Vulcan Steel vs. Evolution Mining | Vulcan Steel vs. Bluescope Steel | Vulcan Steel vs. Aneka Tambang Tbk |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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