Correlation Between Kavango Resources and Altius Minerals

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

By analyzing existing cross correlation between Kavango Resources Plc and Altius Minerals, you can compare the effects of market volatilities on Kavango Resources and Altius Minerals 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 Kavango Resources with a short position of Altius Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kavango Resources and Altius Minerals.

Diversification Opportunities for Kavango Resources and Altius Minerals

0.53

Correlation Coefficient

Kavango Resources  Altius Minerals

Very weak diversification

The 3 months correlation between Kavango and Altius is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kavango Resources Plc and Altius Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altius Minerals and Kavango Resources 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 Kavango Resources Plc are associated (or correlated) with Altius Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altius Minerals has no effect on the direction of Kavango Resources i.e., Kavango Resources and Altius Minerals go up and down completely randomly.

Pair Corralation between Kavango Resources and Altius Minerals

Assuming the 90 days horizon Kavango Resources Plc is expected to generate 2.45 times more return on investment than Altius Minerals. However, Kavango Resources is 2.45 times more volatile than Altius Minerals. It trades about 0.0 of its potential returns per unit of risk. Altius Minerals is currently generating about -0.05 per unit of risk. If you would invest  0.94  in Kavango Resources Plc on December 29, 2024 and sell it today you would lose (0.06) from holding Kavango Resources Plc or give up 6.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Kavango Resources Plc  vs.  Altius Minerals

Kavango Resources Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kavango Resources Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kavango Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Altius Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Altius Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Altius Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kavango Resources and Altius Minerals

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

The idea behind Kavango Resources Plc and Altius Minerals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.