Correlation Between KAT Exploration and Gemz Corp

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

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

Diversification Opportunities for KAT Exploration and Gemz Corp

-0.09

Correlation Coefficient

KAT Exploration  Gemz Corp

Good diversification

The 3 months correlation between KAT and Gemz is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding KAT Exploration and Gemz Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemz Corp and KAT Exploration 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 KAT Exploration are associated (or correlated) with Gemz Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemz Corp has no effect on the direction of KAT Exploration i.e., KAT Exploration and Gemz Corp go up and down completely randomly.

Pair Corralation between KAT Exploration and Gemz Corp

Given the investment horizon of 90 days KAT Exploration is expected to generate 2.7 times more return on investment than Gemz Corp. However, KAT Exploration is 2.7 times more volatile than Gemz Corp. It trades about 0.08 of its potential returns per unit of risk. Gemz Corp is currently generating about 0.07 per unit of risk. If you would invest  0.16  in KAT Exploration on September 16, 2024 and sell it today you would lose (0.14) from holding KAT Exploration or give up 87.5% of portfolio value over 90 days.

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

KAT Exploration  vs.  Gemz Corp

KAT Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Gemz Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KAT Exploration and Gemz Corp

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

The idea behind KAT Exploration and Gemz Corp 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.