Correlation Between Group 6 and Karoon Energy

Can any of the company-specific risk be diversified away by investing in both Group 6 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 Group 6 and Karoon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 6 Metals and Karoon Energy, you can compare the effects of market volatilities on Group 6 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 Group 6 with a short position of Karoon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 6 and Karoon Energy.

Diversification Opportunities for Group 6 and Karoon Energy

-0.15

Correlation Coefficient

Group 6  Karoon Energy

Good diversification

The 3 months correlation between Group and Karoon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Group 6 Metals and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon Energy and Group 6 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 Group 6 Metals 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 Group 6 i.e., Group 6 and Karoon Energy go up and down completely randomly.

Pair Corralation between Group 6 and Karoon Energy

Assuming the 90 days trading horizon Group 6 Metals is expected to generate 0.64 times more return on investment than Karoon Energy. However, Group 6 Metals is 1.56 times less risky than Karoon Energy. It trades about 0.05 of its potential returns per unit of risk. Karoon Energy is currently generating about -0.01 per unit of risk. If you would invest  2.40  in Group 6 Metals on September 16, 2024 and sell it today you would earn a total of  0.10  from holding Group 6 Metals or generate 4.17% return on investment over 90 days.

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

Group 6 Metals  vs.  Karoon Energy

Group 6 Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Group 6 Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Group 6 is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Karoon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karoon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Karoon Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Group 6 and Karoon Energy

The main advantage of trading using opposite Group 6 and Karoon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 6 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 Group 6 Metals 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.