Correlation Between Knife River and Sitka Gold

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

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

Diversification Opportunities for Knife River and Sitka Gold

0.6

Correlation Coefficient

Knife River  Sitka Gold

Poor diversification

The 3 months correlation between Knife and Sitka is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Sitka Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitka Gold Corp and Knife River 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 Knife River are associated (or correlated) with Sitka Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitka Gold Corp has no effect on the direction of Knife River i.e., Knife River and Sitka Gold go up and down completely randomly.

Pair Corralation between Knife River and Sitka Gold

Considering the 90-day investment horizon Knife River is expected to generate 0.52 times more return on investment than Sitka Gold. However, Knife River is 1.94 times less risky than Sitka Gold. It trades about 0.08 of its potential returns per unit of risk. Sitka Gold Corp is currently generating about -0.05 per unit of risk. If you would invest  9,908  in Knife River on August 31, 2024 and sell it today you would earn a total of  442.00  from holding Knife River or generate 4.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Knife River  vs.  Sitka Gold Corp

Knife River

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Sitka Gold Corp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitka Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Sitka Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Sitka Gold

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

The idea behind Knife River and Sitka Gold Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.