Correlation Between KNOTUS CoLtd and Derkwoo Electronics

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

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

Diversification Opportunities for KNOTUS CoLtd and Derkwoo Electronics

0.67

Correlation Coefficient

KNOTUS CoLtd  Derkwoo Electronics

Poor diversification

The 3 months correlation between KNOTUS and Derkwoo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KNOTUS CoLtd and Derkwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derkwoo Electronics 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 Derkwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derkwoo Electronics has no effect on the direction of KNOTUS CoLtd i.e., KNOTUS CoLtd and Derkwoo Electronics go up and down completely randomly.

Pair Corralation between KNOTUS CoLtd and Derkwoo Electronics

Assuming the 90 days trading horizon KNOTUS CoLtd is expected to generate 1.11 times more return on investment than Derkwoo Electronics. However, KNOTUS CoLtd is 1.11 times more volatile than Derkwoo Electronics Co. It trades about -0.02 of its potential returns per unit of risk. Derkwoo Electronics Co is currently generating about -0.13 per unit of risk. If you would invest  225,000  in KNOTUS CoLtd on October 4, 2024 and sell it today you would lose (15,500) from holding KNOTUS CoLtd or give up 6.89% of portfolio value over 90 days.

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

KNOTUS CoLtd  vs.  Derkwoo Electronics Co

KNOTUS CoLtd

Risk-Adjusted Performance

0 of 100

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.

Derkwoo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derkwoo Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KNOTUS CoLtd and Derkwoo Electronics

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

The idea behind KNOTUS CoLtd and Derkwoo Electronics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.