Correlation Between K2 Asset and WA1 Resources

Can any of the company-specific risk be diversified away by investing in both K2 Asset and WA1 Resources 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 WA1 Resources 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 WA1 Resources, you can compare the effects of market volatilities on K2 Asset and WA1 Resources 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 WA1 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and WA1 Resources.

Diversification Opportunities for K2 Asset and WA1 Resources

0.24

Correlation Coefficient

K2 Asset  WA1 Resources

Modest diversification

The 3 months correlation between KAM and WA1 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and WA1 Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WA1 Resources 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 WA1 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WA1 Resources has no effect on the direction of K2 Asset i.e., K2 Asset and WA1 Resources go up and down completely randomly.

Pair Corralation between K2 Asset and WA1 Resources

Assuming the 90 days trading horizon K2 Asset Management is expected to under-perform the WA1 Resources. But the stock apears to be less risky and, when comparing its historical volatility, K2 Asset Management is 3.39 times less risky than WA1 Resources. The stock trades about -0.34 of its potential returns per unit of risk. The WA1 Resources is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,386  in WA1 Resources on October 8, 2024 and sell it today you would lose (44.00) from holding WA1 Resources or give up 3.17% of portfolio value over 90 days.

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

K2 Asset Management  vs.  WA1 Resources

K2 Asset Management

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, K2 Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

WA1 Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WA1 Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WA1 Resources 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 K2 Asset and WA1 Resources

The main advantage of trading using opposite K2 Asset and WA1 Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset position performs unexpectedly, WA1 Resources 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 WA1 Resources will offset losses from the drop in WA1 Resources' long position.

The idea behind K2 Asset Management and WA1 Resources 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .