Correlation Between K W and Eternal Energy

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

By analyzing existing cross correlation between K W Metal and Eternal Energy Public, you can compare the effects of market volatilities on K W and Eternal 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 K W with a short position of Eternal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of K W and Eternal Energy.

Diversification Opportunities for K W and Eternal Energy

-0.55

Correlation Coefficient

K W  Eternal Energy

Excellent diversification

The 3 months correlation between KWM and Eternal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding K W Metal and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public and K W 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 K W Metal are associated (or correlated) with Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of K W i.e., K W and Eternal Energy go up and down completely randomly.

Pair Corralation between K W and Eternal Energy

Assuming the 90 days trading horizon K W Metal is expected to under-perform the Eternal Energy. But the stock apears to be less risky and, when comparing its historical volatility, K W Metal is 6.04 times less risky than Eternal Energy. The stock trades about -0.66 of its potential returns per unit of risk. The Eternal Energy Public is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Eternal Energy Public on October 26, 2024 and sell it today you would lose (4.00) from holding Eternal Energy Public or give up 6.67% of portfolio value over 90 days.

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

K W Metal  vs.  Eternal Energy Public

K W Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K W Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K W and Eternal Energy

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

The idea behind K W Metal and Eternal Energy Public 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 Managers module to screen money managers from public funds and ETFs managed around the world.