Correlation Between Nsx and K2 Asset

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

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

Diversification Opportunities for Nsx and K2 Asset

0.04

Correlation Coefficient

Nsx  K2 Asset

Significant diversification

The 3 months correlation between Nsx and KAM is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nsx 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 Nsx 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 Nsx 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 Nsx i.e., Nsx and K2 Asset go up and down completely randomly.

Pair Corralation between Nsx and K2 Asset

Assuming the 90 days trading horizon Nsx is expected to generate 1.34 times more return on investment than K2 Asset. However, Nsx is 1.34 times more volatile than K2 Asset Management. It trades about 0.0 of its potential returns per unit of risk. K2 Asset Management is currently generating about -0.02 per unit of risk. If you would invest  2.50  in Nsx on December 27, 2024 and sell it today you would lose (0.20) from holding Nsx or give up 8.0% of portfolio value over 90 days.

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

Nsx  vs.  K2 Asset Management

Nsx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nsx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nsx 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

Very Weak

Over the last 90 days K2 Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, K2 Asset is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nsx and K2 Asset

The main advantage of trading using opposite Nsx and K2 Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nsx 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 Nsx 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.