Correlation Between Knight Therapeutics and CTT Pharmaceutical

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

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

Diversification Opportunities for Knight Therapeutics and CTT Pharmaceutical

0.02

Correlation Coefficient

Knight Therapeutics  CTT Pharmaceutical

Significant diversification

The 3 months correlation between Knight and CTT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and CTT Pharmaceutical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTT Pharmaceutical 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 CTT Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTT Pharmaceutical has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and CTT Pharmaceutical go up and down completely randomly.

Pair Corralation between Knight Therapeutics and CTT Pharmaceutical

Assuming the 90 days horizon Knight Therapeutics is expected to generate 399.47 times less return on investment than CTT Pharmaceutical. But when comparing it to its historical volatility, Knight Therapeutics is 15.8 times less risky than CTT Pharmaceutical. It trades about 0.0 of its potential returns per unit of risk. CTT Pharmaceutical Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.79  in CTT Pharmaceutical Holdings on September 14, 2024 and sell it today you would earn a total of  0.91  from holding CTT Pharmaceutical Holdings or generate 32.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Knight Therapeutics  vs.  CTT Pharmaceutical Holdings

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.

CTT Pharmaceutical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTT Pharmaceutical Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, CTT Pharmaceutical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Therapeutics and CTT Pharmaceutical

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

The idea behind Knight Therapeutics and CTT Pharmaceutical Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.