Correlation Between Avarone Metals and Kraken Energy

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

By analyzing existing cross correlation between Avarone Metals and Kraken Energy Corp, you can compare the effects of market volatilities on Avarone Metals and Kraken 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 Avarone Metals with a short position of Kraken Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avarone Metals and Kraken Energy.

Diversification Opportunities for Avarone Metals and Kraken Energy

0.63

Correlation Coefficient

Avarone Metals  Kraken Energy

Poor diversification

The 3 months correlation between Avarone and Kraken is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals and Kraken Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kraken Energy Corp and Avarone Metals 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 Avarone Metals are associated (or correlated) with Kraken Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kraken Energy Corp has no effect on the direction of Avarone Metals i.e., Avarone Metals and Kraken Energy go up and down completely randomly.

Pair Corralation between Avarone Metals and Kraken Energy

Assuming the 90 days horizon Avarone Metals is expected to under-perform the Kraken Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Avarone Metals is 1.16 times less risky than Kraken Energy. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Kraken Energy Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  8.52  in Kraken Energy Corp on September 5, 2024 and sell it today you would lose (5.98) from holding Kraken Energy Corp or give up 70.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Avarone Metals  vs.  Kraken Energy Corp

Avarone Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kraken Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kraken Energy Corp 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Avarone Metals and Kraken Energy

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

The idea behind Avarone Metals and Kraken Energy Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.