Correlation Between KTAM Gold and WISE KTAM

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

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

Diversification Opportunities for KTAM Gold and WISE KTAM

0.42

Correlation Coefficient

KTAM Gold  WISE KTAM

Very weak diversification

The 3 months correlation between KTAM and WISE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding KTAM Gold ETF and WISE KTAM CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE KTAM CSI and KTAM Gold 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 KTAM Gold ETF are associated (or correlated) with WISE KTAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE KTAM CSI has no effect on the direction of KTAM Gold i.e., KTAM Gold and WISE KTAM go up and down completely randomly.

Pair Corralation between KTAM Gold and WISE KTAM

Assuming the 90 days trading horizon KTAM Gold ETF is expected to under-perform the WISE KTAM. But the etf apears to be less risky and, when comparing its historical volatility, KTAM Gold ETF is 2.12 times less risky than WISE KTAM. The etf trades about -0.22 of its potential returns per unit of risk. The WISE KTAM CSI is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  603.00  in WISE KTAM CSI on September 23, 2024 and sell it today you would earn a total of  4.00  from holding WISE KTAM CSI or generate 0.66% return on investment over 90 days.

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

KTAM Gold ETF  vs.  WISE KTAM CSI

KTAM Gold ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KTAM Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, KTAM Gold is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

WISE KTAM CSI

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WISE KTAM CSI are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, WISE KTAM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KTAM Gold and WISE KTAM

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

The idea behind KTAM Gold ETF and WISE KTAM CSI 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.