Correlation Between K2 Asset and Macquarie

Can any of the company-specific risk be diversified away by investing in both K2 Asset and Macquarie 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 K2 Asset and Macquarie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2 Asset Management and Macquarie Group, you can compare the effects of market volatilities on K2 Asset and Macquarie 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 K2 Asset with a short position of Macquarie. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Macquarie.

Diversification Opportunities for K2 Asset and Macquarie

0.41

Correlation Coefficient

K2 Asset  Macquarie

Very weak diversification

The 3 months correlation between KAM and Macquarie is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Macquarie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group and K2 Asset 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 K2 Asset Management are associated (or correlated) with Macquarie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of K2 Asset i.e., K2 Asset and Macquarie go up and down completely randomly.

Pair Corralation between K2 Asset and Macquarie

Assuming the 90 days trading horizon K2 Asset Management is expected to generate 2.14 times more return on investment than Macquarie. However, K2 Asset is 2.14 times more volatile than Macquarie Group. It trades about -0.02 of its potential returns per unit of risk. Macquarie Group is currently generating about -0.11 per unit of risk. If you would invest  7.50  in K2 Asset Management on December 21, 2024 and sell it today you would lose (0.50) from holding K2 Asset Management or give up 6.67% of portfolio value over 90 days.

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

K2 Asset Management  vs.  Macquarie Group

K2 Asset Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days K2 Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, K2 Asset is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with K2 Asset and Macquarie

The main advantage of trading using opposite K2 Asset and Macquarie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, Macquarie 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 Macquarie will offset losses from the drop in Macquarie's long position.

The idea behind K2 Asset Management and Macquarie Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.