Correlation Between K3 Business and Gaming Realms

Can any of the company-specific risk be diversified away by investing in both K3 Business and Gaming Realms 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 K3 Business and Gaming Realms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K3 Business Technology and Gaming Realms plc, you can compare the effects of market volatilities on K3 Business and Gaming Realms 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 K3 Business with a short position of Gaming Realms. Check out your portfolio center. Please also check ongoing floating volatility patterns of K3 Business and Gaming Realms.

Diversification Opportunities for K3 Business and Gaming Realms

0.09

Correlation Coefficient

K3 Business  Gaming Realms

Significant diversification

The 3 months correlation between KBT and Gaming is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding K3 Business Technology and Gaming Realms plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Realms plc and K3 Business 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 K3 Business Technology are associated (or correlated) with Gaming Realms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Realms plc has no effect on the direction of K3 Business i.e., K3 Business and Gaming Realms go up and down completely randomly.

Pair Corralation between K3 Business and Gaming Realms

Assuming the 90 days trading horizon K3 Business Technology is expected to generate 1.79 times more return on investment than Gaming Realms. However, K3 Business is 1.79 times more volatile than Gaming Realms plc. It trades about 0.09 of its potential returns per unit of risk. Gaming Realms plc is currently generating about -0.01 per unit of risk. If you would invest  7,900  in K3 Business Technology on December 29, 2024 and sell it today you would earn a total of  1,600  from holding K3 Business Technology or generate 20.25% return on investment over 90 days.

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

K3 Business Technology  vs.  Gaming Realms plc

K3 Business Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K3 Business Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, K3 Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gaming Realms plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gaming Realms plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Gaming Realms is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with K3 Business and Gaming Realms

The main advantage of trading using opposite K3 Business and Gaming Realms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K3 Business position performs unexpectedly, Gaming Realms 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 Gaming Realms will offset losses from the drop in Gaming Realms' long position.

The idea behind K3 Business Technology and Gaming Realms plc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.