Correlation Between KNH Enterprise and Universal

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

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

Diversification Opportunities for KNH Enterprise and Universal

0.93

Correlation Coefficient

KNH Enterprise  Universal

Almost no diversification

The 3 months correlation between KNH and Universal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding KNH Enterprise Co and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and KNH Enterprise 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 KNH Enterprise Co are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of KNH Enterprise i.e., KNH Enterprise and Universal go up and down completely randomly.

Pair Corralation between KNH Enterprise and Universal

Assuming the 90 days trading horizon KNH Enterprise is expected to generate 2.08 times less return on investment than Universal. But when comparing it to its historical volatility, KNH Enterprise Co is 1.18 times less risky than Universal. It trades about 0.04 of its potential returns per unit of risk. Universal is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,720  in Universal on December 5, 2024 and sell it today you would earn a total of  390.00  from holding Universal or generate 14.34% return on investment over 90 days.

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

KNH Enterprise Co  vs.  Universal

KNH Enterprise

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNH Enterprise Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KNH Enterprise may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Universal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNH Enterprise and Universal

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

The idea behind KNH Enterprise Co and Universal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.