Correlation Between CanAlaska Uranium and Kraken Energy

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

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

Diversification Opportunities for CanAlaska Uranium and Kraken Energy

0.24

Correlation Coefficient

CanAlaska Uranium  Kraken Energy

Modest diversification

The 3 months correlation between CanAlaska and Kraken is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CanAlaska Uranium and Kraken Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraken Energy Corp and CanAlaska Uranium 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 CanAlaska Uranium are associated (or correlated) with Kraken Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraken Energy Corp has no effect on the direction of CanAlaska Uranium i.e., CanAlaska Uranium and Kraken Energy go up and down completely randomly.

Pair Corralation between CanAlaska Uranium and Kraken Energy

Assuming the 90 days horizon CanAlaska Uranium is expected to generate 1.55 times less return on investment than Kraken Energy. But when comparing it to its historical volatility, CanAlaska Uranium is 2.96 times less risky than Kraken Energy. It trades about 0.06 of its potential returns per unit of risk. Kraken Energy Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Kraken Energy Corp on December 30, 2024 and sell it today you would lose (0.45) from holding Kraken Energy Corp or give up 22.5% of portfolio value over 90 days.

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

CanAlaska Uranium  vs.  Kraken Energy Corp

CanAlaska Uranium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CanAlaska Uranium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CanAlaska Uranium reported solid returns over the last few months and may actually be approaching a breakup point.

Kraken Energy Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kraken Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kraken Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CanAlaska Uranium and Kraken Energy

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

The idea behind CanAlaska Uranium and Kraken Energy 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.