Correlation Between Knowles Cor and Clearfield

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

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

Diversification Opportunities for Knowles Cor and Clearfield

-0.54

Correlation Coefficient

Knowles Cor  Clearfield

Excellent diversification

The 3 months correlation between Knowles and Clearfield is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield and Knowles Cor 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 Knowles Cor are associated (or correlated) with Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Knowles Cor i.e., Knowles Cor and Clearfield go up and down completely randomly.

Pair Corralation between Knowles Cor and Clearfield

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.71 times more return on investment than Clearfield. However, Knowles Cor is 1.4 times less risky than Clearfield. It trades about 0.2 of its potential returns per unit of risk. Clearfield is currently generating about -0.25 per unit of risk. If you would invest  1,751  in Knowles Cor on August 31, 2024 and sell it today you would earn a total of  173.00  from holding Knowles Cor or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Knowles Cor  vs.  Clearfield

Knowles Cor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Knowles Cor may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Clearfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Knowles Cor and Clearfield

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

The idea behind Knowles Cor and Clearfield 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.