Correlation Between Karora Resources and Reunion Gold

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Can any of the company-specific risk be diversified away by investing in both Karora Resources and Reunion 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 Karora Resources and Reunion Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Karora Resources and Reunion Gold, you can compare the effects of market volatilities on Karora Resources and Reunion 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 Karora Resources with a short position of Reunion Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Karora Resources and Reunion Gold.

Diversification Opportunities for Karora Resources and Reunion Gold

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Karora and Reunion is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Karora Resources and Reunion Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reunion Gold and Karora Resources 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 Karora Resources are associated (or correlated) with Reunion Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reunion Gold has no effect on the direction of Karora Resources i.e., Karora Resources and Reunion Gold go up and down completely randomly.

Pair Corralation between Karora Resources and Reunion Gold

Assuming the 90 days trading horizon Karora Resources is expected to generate 0.78 times more return on investment than Reunion Gold. However, Karora Resources is 1.29 times less risky than Reunion Gold. It trades about 0.37 of its potential returns per unit of risk. Reunion Gold is currently generating about 0.22 per unit of risk. If you would invest  408.00  in Karora Resources on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Karora Resources or generate 24.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Karora Resources  vs.  Reunion Gold

 Performance 
       Timeline  
Karora Resources 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Karora Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Karora Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Reunion Gold 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Reunion Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Reunion Gold may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Karora Resources and Reunion Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Karora Resources and Reunion Gold

The main advantage of trading using opposite Karora Resources and Reunion Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karora Resources position performs unexpectedly, Reunion 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 Reunion Gold will offset losses from the drop in Reunion Gold's long position.
The idea behind Karora Resources and Reunion 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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