Correlation Between Knight Therapeutics and Alterola Biotech

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

By analyzing existing cross correlation between Knight Therapeutics and Alterola Biotech, you can compare the effects of market volatilities on Knight Therapeutics and Alterola Biotech 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 Alterola Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Alterola Biotech.

Diversification Opportunities for Knight Therapeutics and Alterola Biotech

0.21

Correlation Coefficient

Knight Therapeutics  Alterola Biotech

Modest diversification

The 3 months correlation between Knight and Alterola is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Alterola Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alterola Biotech 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 Alterola Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alterola Biotech has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Alterola Biotech go up and down completely randomly.

Pair Corralation between Knight Therapeutics and Alterola Biotech

Assuming the 90 days horizon Knight Therapeutics is expected to generate 315.11 times less return on investment than Alterola Biotech. But when comparing it to its historical volatility, Knight Therapeutics is 19.88 times less risky than Alterola Biotech. It trades about 0.0 of its potential returns per unit of risk. Alterola Biotech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Alterola Biotech on September 14, 2024 and sell it today you would lose (6.23) from holding Alterola Biotech or give up 89.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Knight Therapeutics  vs.  Alterola Biotech

Knight Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alterola Biotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alterola Biotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Alterola Biotech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Therapeutics and Alterola Biotech

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

The idea behind Knight Therapeutics and Alterola Biotech 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.