Correlation Between Microequities Asset and K2 Asset

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

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

Diversification Opportunities for Microequities Asset and K2 Asset

-0.15

Correlation Coefficient

Microequities Asset  K2 Asset

Good diversification

The 3 months correlation between Microequities and KAM is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microequities Asset Management and K2 Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Asset Management and Microequities Asset 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 Microequities Asset Management are associated (or correlated) with K2 Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Asset Management has no effect on the direction of Microequities Asset i.e., Microequities Asset and K2 Asset go up and down completely randomly.

Pair Corralation between Microequities Asset and K2 Asset

Assuming the 90 days trading horizon Microequities Asset is expected to generate 90.62 times less return on investment than K2 Asset. But when comparing it to its historical volatility, Microequities Asset Management is 1.81 times less risky than K2 Asset. It trades about 0.0 of its potential returns per unit of risk. K2 Asset Management is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.14  in K2 Asset Management on September 29, 2024 and sell it today you would earn a total of  3.36  from holding K2 Asset Management or generate 81.16% return on investment over 90 days.

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

Microequities Asset Management  vs.  K2 Asset Management

Microequities Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microequities Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Microequities Asset is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

K2 Asset Management

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, K2 Asset unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microequities Asset and K2 Asset

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

The idea behind Microequities Asset Management and K2 Asset Management 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.