Correlation Between KAT Exploration and Metal Sky

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

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

Diversification Opportunities for KAT Exploration and Metal Sky

-0.41

Correlation Coefficient

KAT Exploration  Metal Sky

Very good diversification

The 3 months correlation between KAT and Metal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding KAT Exploration and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star and KAT Exploration 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 KAT Exploration are associated (or correlated) with Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of KAT Exploration i.e., KAT Exploration and Metal Sky go up and down completely randomly.

Pair Corralation between KAT Exploration and Metal Sky

Given the investment horizon of 90 days KAT Exploration is expected to generate 25.46 times more return on investment than Metal Sky. However, KAT Exploration is 25.46 times more volatile than Metal Sky Star. It trades about 0.05 of its potential returns per unit of risk. Metal Sky Star is currently generating about 0.07 per unit of risk. If you would invest  0.04  in KAT Exploration on September 18, 2024 and sell it today you would lose (0.02) from holding KAT Exploration or give up 50.0% of portfolio value over 90 days.

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

KAT Exploration  vs.  Metal Sky Star

KAT Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KAT Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KAT Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Metal Sky Star

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Metal Sky is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KAT Exploration and Metal Sky

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

The idea behind KAT Exploration and Metal Sky Star 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.