Correlation Between Intl Star and KAT Exploration

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

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

Diversification Opportunities for Intl Star and KAT Exploration

0.36

Correlation Coefficient

Intl Star  KAT Exploration

Weak diversification

The 3 months correlation between Intl and KAT is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Intl Star and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration and Intl Star 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 Intl Star 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 Intl Star i.e., Intl Star and KAT Exploration go up and down completely randomly.

Pair Corralation between Intl Star and KAT Exploration

Given the investment horizon of 90 days Intl Star is expected to generate 0.65 times more return on investment than KAT Exploration. However, Intl Star is 1.54 times less risky than KAT Exploration. It trades about 0.05 of its potential returns per unit of risk. KAT Exploration is currently generating about 0.03 per unit of risk. If you would invest  0.11  in Intl Star on September 15, 2024 and sell it today you would lose (0.01) from holding Intl Star or give up 9.09% of portfolio value over 90 days.

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

Intl Star  vs.  KAT Exploration

Intl Star

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intl Star are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Intl Star unveiled solid returns over the last few months and may actually be approaching a breakup point.

KAT Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 2 (%) 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 Intl Star and KAT Exploration

The main advantage of trading using opposite Intl Star and KAT Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intl Star 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 Intl Star 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.