Correlation Between K92 Mining and Treasury Metals

Can any of the company-specific risk be diversified away by investing in both K92 Mining and Treasury Metals 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 K92 Mining and Treasury Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K92 Mining and Treasury Metals, you can compare the effects of market volatilities on K92 Mining and Treasury Metals 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 K92 Mining with a short position of Treasury Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of K92 Mining and Treasury Metals.

Diversification Opportunities for K92 Mining and Treasury Metals

0.91

Correlation Coefficient

K92 Mining  Treasury Metals

Almost no diversification

The 3 months correlation between K92 and Treasury is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding K92 Mining and Treasury Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Metals and K92 Mining 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 K92 Mining are associated (or correlated) with Treasury Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Metals has no effect on the direction of K92 Mining i.e., K92 Mining and Treasury Metals go up and down completely randomly.

Pair Corralation between K92 Mining and Treasury Metals

Assuming the 90 days horizon K92 Mining is expected to generate 2.5 times less return on investment than Treasury Metals. But when comparing it to its historical volatility, K92 Mining is 2.44 times less risky than Treasury Metals. It trades about 0.21 of its potential returns per unit of risk. Treasury Metals is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  9.00  in Treasury Metals on February 29, 2024 and sell it today you would earn a total of  10.00  from holding Treasury Metals or generate 111.11% return on investment over 90 days.

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

K92 Mining  vs.  Treasury Metals

K92 Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K92 Mining are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, K92 Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Treasury Metals

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Treasury Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K92 Mining and Treasury Metals

The main advantage of trading using opposite K92 Mining and Treasury Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K92 Mining position performs unexpectedly, Treasury Metals 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 Treasury Metals will offset losses from the drop in Treasury Metals' long position.

The idea behind K92 Mining and Treasury Metals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.