Correlation Between Balancer and KNC

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

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

Diversification Opportunities for Balancer and KNC

0.95

Correlation Coefficient

Balancer  KNC

Almost no diversification

The 3 months correlation between Balancer and KNC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Balancer and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC and Balancer 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 Balancer 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 Balancer i.e., Balancer and KNC go up and down completely randomly.

Pair Corralation between Balancer and KNC

Assuming the 90 days trading horizon Balancer is expected to generate 1.11 times less return on investment than KNC. In addition to that, Balancer is 1.02 times more volatile than KNC. It trades about 0.18 of its total potential returns per unit of risk. KNC is currently generating about 0.2 per unit of volatility. If you would invest  42.00  in KNC on September 1, 2024 and sell it today you would earn a total of  29.00  from holding KNC or generate 69.05% return on investment over 90 days.

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

Balancer  vs.  KNC

Balancer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Balancer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Balancer 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 Balancer and KNC

The main advantage of trading using opposite Balancer and KNC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balancer 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 Balancer 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.