Correlation Between KDA and Topaz Energy

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

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

Diversification Opportunities for KDA and Topaz Energy

-0.42

Correlation Coefficient

KDA  Topaz Energy

Very good diversification

The 3 months correlation between KDA and Topaz is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp and KDA 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 KDA Group are associated (or correlated) with Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of KDA i.e., KDA and Topaz Energy go up and down completely randomly.

Pair Corralation between KDA and Topaz Energy

Assuming the 90 days horizon KDA Group is expected to generate 4.56 times more return on investment than Topaz Energy. However, KDA is 4.56 times more volatile than Topaz Energy Corp. It trades about 0.05 of its potential returns per unit of risk. Topaz Energy Corp is currently generating about 0.08 per unit of risk. If you would invest  25.00  in KDA Group on September 12, 2024 and sell it today you would earn a total of  2.00  from holding KDA Group or generate 8.0% return on investment over 90 days.

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

KDA Group  vs.  Topaz Energy Corp

KDA Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KDA Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, KDA showed solid returns over the last few months and may actually be approaching a breakup point.

Topaz Energy Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Topaz Energy Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Topaz Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KDA and Topaz Energy

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

The idea behind KDA Group and Topaz Energy 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.