Correlation Between K2 Gold and EnCore Energy

Can any of the company-specific risk be diversified away by investing in both K2 Gold and EnCore 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 K2 Gold and EnCore Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2 Gold and enCore Energy Corp, you can compare the effects of market volatilities on K2 Gold and EnCore 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 K2 Gold with a short position of EnCore Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Gold and EnCore Energy.

Diversification Opportunities for K2 Gold and EnCore Energy

-0.11

Correlation Coefficient

K2 Gold  EnCore Energy

Good diversification

The 3 months correlation between KTO and EnCore is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding K2 Gold and enCore Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on enCore Energy Corp and K2 Gold 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 Gold are associated (or correlated) with EnCore Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of enCore Energy Corp has no effect on the direction of K2 Gold i.e., K2 Gold and EnCore Energy go up and down completely randomly.

Pair Corralation between K2 Gold and EnCore Energy

Assuming the 90 days horizon K2 Gold is expected to generate 2.97 times more return on investment than EnCore Energy. However, K2 Gold is 2.97 times more volatile than enCore Energy Corp. It trades about 0.21 of its potential returns per unit of risk. enCore Energy Corp is currently generating about -0.29 per unit of risk. If you would invest  10.00  in K2 Gold on September 17, 2024 and sell it today you would earn a total of  3.00  from holding K2 Gold or generate 30.0% return on investment over 90 days.

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

K2 Gold  vs.  enCore Energy Corp

K2 Gold

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Gold are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, K2 Gold showed solid returns over the last few months and may actually be approaching a breakup point.

enCore Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days enCore Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnCore Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with K2 Gold and EnCore Energy

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

The idea behind K2 Gold and enCore 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.