Correlation Between Clean Air and Kodiak Copper

Can any of the company-specific risk be diversified away by investing in both Clean Air and Kodiak Copper 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 Clean Air and Kodiak Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clean Air Metals and Kodiak Copper Corp, you can compare the effects of market volatilities on Clean Air and Kodiak Copper 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 Clean Air with a short position of Kodiak Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Air and Kodiak Copper.

Diversification Opportunities for Clean Air and Kodiak Copper

0.69

Correlation Coefficient

Clean Air  Kodiak Copper

Poor diversification

The 3 months correlation between Clean and Kodiak is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Clean Air Metals and Kodiak Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Copper Corp and Clean Air 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 Clean Air Metals are associated (or correlated) with Kodiak Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Copper Corp has no effect on the direction of Clean Air i.e., Clean Air and Kodiak Copper go up and down completely randomly.

Pair Corralation between Clean Air and Kodiak Copper

Assuming the 90 days horizon Clean Air Metals is expected to generate 2.3 times more return on investment than Kodiak Copper. However, Clean Air is 2.3 times more volatile than Kodiak Copper Corp. It trades about -0.02 of its potential returns per unit of risk. Kodiak Copper Corp is currently generating about -0.06 per unit of risk. If you would invest  4.90  in Clean Air Metals on September 12, 2024 and sell it today you would lose (1.10) from holding Clean Air Metals or give up 22.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Clean Air Metals  vs.  Kodiak Copper Corp

Clean Air Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Air Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Kodiak Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kodiak Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Clean Air and Kodiak Copper

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

The idea behind Clean Air Metals and Kodiak Copper Corp 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.