Correlation Between GRIN and KNC

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

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

Diversification Opportunities for GRIN and KNC

0.8

Correlation Coefficient

GRIN  KNC

Very poor diversification

The 3 months correlation between GRIN and KNC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GRIN and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC and GRIN 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 GRIN 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 GRIN i.e., GRIN and KNC go up and down completely randomly.

Pair Corralation between GRIN and KNC

Assuming the 90 days trading horizon GRIN is expected to generate 1.12 times less return on investment than KNC. In addition to that, GRIN is 1.16 times more volatile than KNC. It trades about 0.15 of its total potential returns per unit of risk. KNC is currently generating about 0.2 per unit of volatility. If you would invest  42.00  in KNC on September 2, 2024 and sell it today you would earn a total of  29.00  from holding KNC or generate 69.05% return on investment over 90 days.

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

GRIN  vs.  KNC

GRIN

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GRIN are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GRIN 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 GRIN and KNC

The main advantage of trading using opposite GRIN and KNC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GRIN 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 GRIN 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.