Correlation Between Syrah Resources and KAT Exploration

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

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

Diversification Opportunities for Syrah Resources and KAT Exploration

0.48

Correlation Coefficient

Syrah Resources  KAT Exploration

Very weak diversification

The 3 months correlation between Syrah and KAT is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Syrah Resources Limited and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration and Syrah 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 Syrah Resources Limited are associated (or correlated) with KAT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAT Exploration has no effect on the direction of Syrah Resources i.e., Syrah Resources and KAT Exploration go up and down completely randomly.

Pair Corralation between Syrah Resources and KAT Exploration

Assuming the 90 days horizon Syrah Resources Limited is expected to under-perform the KAT Exploration. But the pink sheet apears to be less risky and, when comparing its historical volatility, Syrah Resources Limited is 2.42 times less risky than KAT Exploration. The pink sheet trades about -0.05 of its potential returns per unit of risk. The KAT Exploration is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.02  in KAT Exploration on October 6, 2024 and sell it today you would earn a total of  0.02  from holding KAT Exploration or generate 100.0% return on investment over 90 days.

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

Syrah Resources Limited  vs.  KAT Exploration

Syrah Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syrah Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KAT Exploration

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Syrah Resources and KAT Exploration

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

The idea behind Syrah Resources Limited and KAT Exploration 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.