Correlation Between Canoo Holdings and KAT Exploration

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

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

Diversification Opportunities for Canoo Holdings and KAT Exploration

-0.13

Correlation Coefficient

Canoo Holdings  KAT Exploration

Good diversification

The 3 months correlation between Canoo and KAT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Holdings and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration and Canoo Holdings 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 Canoo Holdings are associated (or correlated) with KAT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAT Exploration has no effect on the direction of Canoo Holdings i.e., Canoo Holdings and KAT Exploration go up and down completely randomly.

Pair Corralation between Canoo Holdings and KAT Exploration

Assuming the 90 days horizon Canoo Holdings is expected to under-perform the KAT Exploration. In addition to that, Canoo Holdings is 1.81 times more volatile than KAT Exploration. It trades about -0.1 of its total potential returns per unit of risk. KAT Exploration is currently generating about 0.07 per unit of volatility. If you would invest  0.03  in KAT Exploration on December 26, 2024 and sell it today you would earn a total of  0.00  from holding KAT Exploration or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.07%
Values	Daily Returns

Canoo Holdings  vs.  KAT Exploration

Canoo Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canoo Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

KAT Exploration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canoo Holdings and KAT Exploration

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

The idea behind Canoo Holdings and KAT Exploration 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.