Correlation Between Houston Natural and Kenadyr Mining

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

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

Diversification Opportunities for Houston Natural and Kenadyr Mining

-0.44

Correlation Coefficient

Houston Natural  Kenadyr Mining

Very good diversification

The 3 months correlation between Houston and Kenadyr is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Houston Natural Resources and Kenadyr Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenadyr Mining Corp and Houston Natural 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 Houston Natural Resources are associated (or correlated) with Kenadyr Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenadyr Mining Corp has no effect on the direction of Houston Natural i.e., Houston Natural and Kenadyr Mining go up and down completely randomly.

Pair Corralation between Houston Natural and Kenadyr Mining

Given the investment horizon of 90 days Houston Natural Resources is expected to under-perform the Kenadyr Mining. In addition to that, Houston Natural is 1.34 times more volatile than Kenadyr Mining Corp. It trades about -0.06 of its total potential returns per unit of risk. Kenadyr Mining Corp is currently generating about 0.01 per unit of volatility. If you would invest  1.24  in Kenadyr Mining Corp on January 31, 2024 and sell it today you would lose (0.26) from holding Kenadyr Mining Corp or give up 20.97% of portfolio value over 90 days.

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

Houston Natural Resources  vs.  Kenadyr Mining Corp

Houston Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Houston Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kenadyr Mining Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenadyr Mining Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kenadyr Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Houston Natural and Kenadyr Mining

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

The idea behind Houston Natural Resources and Kenadyr Mining Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.