Correlation Between KAT Exploration and New Generation

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

By analyzing existing cross correlation between KAT Exploration and New Generation Consumer, you can compare the effects of market volatilities on KAT Exploration and New Generation 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 New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAT Exploration and New Generation.

Diversification Opportunities for KAT Exploration and New Generation

0.41

Correlation Coefficient

KAT Exploration  New Generation

Very weak diversification

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

Pair Corralation between KAT Exploration and New Generation

Given the investment horizon of 90 days KAT Exploration is expected to generate 1.31 times less return on investment than New Generation. In addition to that, KAT Exploration is 1.65 times more volatile than New Generation Consumer. It trades about 0.03 of its total potential returns per unit of risk. New Generation Consumer is currently generating about 0.07 per unit of volatility. If you would invest  0.06  in New Generation Consumer on September 18, 2024 and sell it today you would earn a total of  0.00  from holding New Generation Consumer or generate 0.0% return on investment over 90 days.

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

KAT Exploration  vs.  New Generation Consumer

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.

New Generation Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KAT Exploration and New Generation

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

The idea behind KAT Exploration and New Generation Consumer 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.