Correlation Between Synthetix and KNC

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

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

Diversification Opportunities for Synthetix and KNC

0.97

Correlation Coefficient

Synthetix  KNC

Almost no diversification

The 3 months correlation between Synthetix and KNC is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Synthetix and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC and Synthetix 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 Synthetix are associated (or correlated) with KNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNC has no effect on the direction of Synthetix i.e., Synthetix and KNC go up and down completely randomly.

Pair Corralation between Synthetix and KNC

Assuming the 90 days trading horizon Synthetix is expected to generate 1.15 times more return on investment than KNC. However, Synthetix is 1.15 times more volatile than KNC. It trades about 0.24 of its potential returns per unit of risk. KNC is currently generating about 0.2 per unit of risk. If you would invest  128.00  in Synthetix on September 2, 2024 and sell it today you would earn a total of  135.00  from holding Synthetix or generate 105.47% return on investment over 90 days.

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

Synthetix  vs.  KNC

Synthetix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Synthetix exhibited solid returns over the last few months and may actually be approaching a breakup point.

KNC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KNC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KNC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synthetix and KNC

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

The idea behind Synthetix and KNC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.