Correlation Between Armada Hflr and KAT Exploration

Can any of the company-specific risk be diversified away by investing in both Armada Hflr and KAT Exploration 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 Armada Hflr and KAT Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and KAT Exploration, you can compare the effects of market volatilities on Armada Hflr and KAT Exploration 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 Armada Hflr with a short position of KAT Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and KAT Exploration.

Diversification Opportunities for Armada Hflr and KAT Exploration

0.41

Correlation Coefficient

Armada Hflr  KAT Exploration

Very weak diversification

The 3 months correlation between Armada and KAT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with KAT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAT Exploration has no effect on the direction of Armada Hflr i.e., Armada Hflr and KAT Exploration go up and down completely randomly.

Pair Corralation between Armada Hflr and KAT Exploration

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the KAT Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 13.86 times less risky than KAT Exploration. The stock trades about -0.08 of its potential returns per unit of risk. The KAT Exploration is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.05  in KAT Exploration on September 15, 2024 and sell it today you would lose (0.03) from holding KAT Exploration or give up 60.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Armada Hflr Pr  vs.  KAT Exploration

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

KAT Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hflr and KAT Exploration

The main advantage of trading using opposite Armada Hflr and KAT Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr position performs unexpectedly, KAT Exploration 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 KAT Exploration will offset losses from the drop in KAT Exploration's long position.

The idea behind Armada Hflr Pr and KAT Exploration 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.