Correlation Between Hironic and KNOTUS CoLtd

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

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

Diversification Opportunities for Hironic and KNOTUS CoLtd

0.63

Correlation Coefficient

Hironic  KNOTUS CoLtd

Poor diversification

The 3 months correlation between Hironic and KNOTUS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hironic Co and KNOTUS CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOTUS CoLtd and Hironic 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 Hironic Co are associated (or correlated) with KNOTUS CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOTUS CoLtd has no effect on the direction of Hironic i.e., Hironic and KNOTUS CoLtd go up and down completely randomly.

Pair Corralation between Hironic and KNOTUS CoLtd

Assuming the 90 days trading horizon Hironic Co is expected to generate 1.5 times more return on investment than KNOTUS CoLtd. However, Hironic is 1.5 times more volatile than KNOTUS CoLtd. It trades about 0.34 of its potential returns per unit of risk. KNOTUS CoLtd is currently generating about 0.49 per unit of risk. If you would invest  531,000  in Hironic Co on October 10, 2024 and sell it today you would earn a total of  135,000  from holding Hironic Co or generate 25.42% return on investment over 90 days.

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

Hironic Co  vs.  KNOTUS CoLtd

Hironic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hironic Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hironic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KNOTUS CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Hironic and KNOTUS CoLtd

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

The idea behind Hironic Co and KNOTUS CoLtd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.