Correlation Between Computershare and Karoon Energy

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

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

Diversification Opportunities for Computershare and Karoon Energy

0.12

Correlation Coefficient

Computershare  Karoon Energy

Average diversification

The 3 months correlation between Computershare and Karoon is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon Energy and Computershare 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 Computershare are associated (or correlated) with Karoon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karoon Energy has no effect on the direction of Computershare i.e., Computershare and Karoon Energy go up and down completely randomly.

Pair Corralation between Computershare and Karoon Energy

Assuming the 90 days trading horizon Computershare is expected to generate 1.61 times less return on investment than Karoon Energy. In addition to that, Computershare is 1.05 times more volatile than Karoon Energy. It trades about 0.12 of its total potential returns per unit of risk. Karoon Energy is currently generating about 0.2 per unit of volatility. If you would invest  126.00  in Karoon Energy on December 25, 2024 and sell it today you would earn a total of  38.00  from holding Karoon Energy or generate 30.16% return on investment over 90 days.

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

Computershare  vs.  Karoon Energy

Computershare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Karoon Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Karoon Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Karoon Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computershare and Karoon Energy

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

The idea behind Computershare and Karoon Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.