Correlation Between KNOTUS CoLtd and Hironic

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

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

Diversification Opportunities for KNOTUS CoLtd and Hironic

0.27

Correlation Coefficient

KNOTUS CoLtd  Hironic

Modest diversification

The 3 months correlation between KNOTUS and Hironic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding KNOTUS CoLtd and Hironic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hironic and KNOTUS CoLtd 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 KNOTUS CoLtd are associated (or correlated) with Hironic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hironic has no effect on the direction of KNOTUS CoLtd i.e., KNOTUS CoLtd and Hironic go up and down completely randomly.

Pair Corralation between KNOTUS CoLtd and Hironic

Assuming the 90 days trading horizon KNOTUS CoLtd is expected to generate 1.22 times more return on investment than Hironic. However, KNOTUS CoLtd is 1.22 times more volatile than Hironic Co. It trades about -0.01 of its potential returns per unit of risk. Hironic Co is currently generating about -0.02 per unit of risk. If you would invest  197,100  in KNOTUS CoLtd on December 24, 2024 and sell it today you would lose (9,900) from holding KNOTUS CoLtd or give up 5.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

KNOTUS CoLtd  vs.  Hironic Co

KNOTUS CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNOTUS CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KNOTUS CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hironic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hironic Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with KNOTUS CoLtd and Hironic

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

The idea behind KNOTUS CoLtd and Hironic Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.