Correlation Between Blue Sky and K2 Gold

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

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

Diversification Opportunities for Blue Sky and K2 Gold

0.29

Correlation Coefficient

Blue Sky  K2 Gold

Modest diversification

The 3 months correlation between Blue and KTO is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Blue Sky Uranium and K2 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K2 Gold and Blue Sky 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 Blue Sky Uranium are associated (or correlated) with K2 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K2 Gold has no effect on the direction of Blue Sky i.e., Blue Sky and K2 Gold go up and down completely randomly.

Pair Corralation between Blue Sky and K2 Gold

Assuming the 90 days horizon Blue Sky is expected to generate 2.44 times less return on investment than K2 Gold. But when comparing it to its historical volatility, Blue Sky Uranium is 1.07 times less risky than K2 Gold. It trades about 0.04 of its potential returns per unit of risk. K2 Gold is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9.50  in K2 Gold on September 12, 2024 and sell it today you would earn a total of  2.50  from holding K2 Gold or generate 26.32% return on investment over 90 days.

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

Blue Sky Uranium  vs.  K2 Gold

Blue Sky Uranium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Sky Uranium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Blue Sky showed solid returns over the last few months and may actually be approaching a breakup point.

K2 Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K2 Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Sky and K2 Gold

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

The idea behind Blue Sky Uranium and K2 Gold 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.