Correlation Between Arkham and KNC

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

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

Diversification Opportunities for Arkham and KNC

0.65

Correlation Coefficient

Arkham  KNC

Poor diversification

The 3 months correlation between Arkham and KNC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Arkham and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC and Arkham 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 Arkham are associated (or correlated) with KNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNC has no effect on the direction of Arkham i.e., Arkham and KNC go up and down completely randomly.

Pair Corralation between Arkham and KNC

Assuming the 90 days trading horizon Arkham is expected to generate 1.51 times more return on investment than KNC. However, Arkham is 1.51 times more volatile than KNC. It trades about 0.24 of its potential returns per unit of risk. KNC is currently generating about 0.2 per unit of risk. If you would invest  96.00  in Arkham on September 2, 2024 and sell it today you would earn a total of  145.00  from holding Arkham or generate 151.04% return on investment over 90 days.

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

Arkham  vs.  KNC

Arkham

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arkham are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Arkham exhibited solid returns over the last few months and may actually be approaching a breakup point.

KNC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KNC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KNC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arkham and KNC

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

The idea behind Arkham and KNC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.