Correlation Between K2 Asset and Medical Developments

Can any of the company-specific risk be diversified away by investing in both K2 Asset and Medical Developments 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 Medical Developments 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 Medical Developments International, you can compare the effects of market volatilities on K2 Asset and Medical Developments 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 Medical Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and Medical Developments.

Diversification Opportunities for K2 Asset and Medical Developments

0.49

Correlation Coefficient

K2 Asset  Medical Developments

Very weak diversification

The 3 months correlation between KAM and Medical is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and Medical Developments Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Developments 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 Medical Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Developments has no effect on the direction of K2 Asset i.e., K2 Asset and Medical Developments go up and down completely randomly.

Pair Corralation between K2 Asset and Medical Developments

Assuming the 90 days trading horizon K2 Asset Management is expected to under-perform the Medical Developments. But the stock apears to be less risky and, when comparing its historical volatility, K2 Asset Management is 2.7 times less risky than Medical Developments. The stock trades about -0.02 of its potential returns per unit of risk. The Medical Developments International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Medical Developments International on December 21, 2024 and sell it today you would earn a total of  25.00  from holding Medical Developments International or generate 62.5% return on investment over 90 days.

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

K2 Asset Management  vs.  Medical Developments Internati

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.

Medical Developments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Developments International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Medical Developments unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K2 Asset and Medical Developments

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

The idea behind K2 Asset Management and Medical Developments International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.