Correlation Between Genolution and KNOTUS CoLtd

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

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

Diversification Opportunities for Genolution and KNOTUS CoLtd

0.74

Correlation Coefficient

Genolution  KNOTUS CoLtd

Poor diversification

The 3 months correlation between Genolution and KNOTUS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Genolution and KNOTUS CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOTUS CoLtd and Genolution 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 Genolution are associated (or correlated) with KNOTUS CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOTUS CoLtd has no effect on the direction of Genolution i.e., Genolution and KNOTUS CoLtd go up and down completely randomly.

Pair Corralation between Genolution and KNOTUS CoLtd

Assuming the 90 days trading horizon Genolution is expected to under-perform the KNOTUS CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Genolution is 1.26 times less risky than KNOTUS CoLtd. The stock trades about -0.22 of its potential returns per unit of risk. The KNOTUS CoLtd is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  237,000  in KNOTUS CoLtd on September 27, 2024 and sell it today you would lose (39,900) from holding KNOTUS CoLtd or give up 16.84% of portfolio value over 90 days.

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

Genolution  vs.  KNOTUS CoLtd

Genolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KNOTUS CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNOTUS CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Genolution and KNOTUS CoLtd

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

The idea behind Genolution and KNOTUS CoLtd 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.

Check out your portfolio center.

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.