Correlation Between Knight Therapeutics and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Knight Therapeutics and Leons Furniture 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 Knight Therapeutics and Leons Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Therapeutics and Leons Furniture Limited, you can compare the effects of market volatilities on Knight Therapeutics and Leons Furniture 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 Knight Therapeutics with a short position of Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Leons Furniture.
Diversification Opportunities for Knight Therapeutics and Leons Furniture
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Knight and Leons is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture and Knight Therapeutics 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 Knight Therapeutics are associated (or correlated) with Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Leons Furniture go up and down completely randomly.
Pair Corralation between Knight Therapeutics and Leons Furniture
Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 1.32 times more return on investment than Leons Furniture. However, Knight Therapeutics is 1.32 times more volatile than Leons Furniture Limited. It trades about -0.09 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.14 per unit of risk. If you would invest 590.00 in Knight Therapeutics on September 25, 2024 and sell it today you would lose (67.00) from holding Knight Therapeutics or give up 11.36% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Knight Therapeutics vs. Leons Furniture Limited
Performance |
Timeline |
Knight Therapeutics |
Leons Furniture |
Knight Therapeutics and Leons Furniture Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Knight Therapeutics and Leons Furniture
The main advantage of trading using opposite Knight Therapeutics and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Therapeutics position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.Knight Therapeutics vs. Stella Jones | Knight Therapeutics vs. Richelieu Hardware | Knight Therapeutics vs. Element Fleet Management | Knight Therapeutics vs. ECN Capital Corp |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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