Correlation Between Bird Construction and Knight Therapeutics

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

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

Diversification Opportunities for Bird Construction and Knight Therapeutics

-0.61

Correlation Coefficient

Bird Construction  Knight Therapeutics

Excellent diversification

The 3 months correlation between Bird and Knight is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bird Construction and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Bird Construction 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 Bird Construction are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of Bird Construction i.e., Bird Construction and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Bird Construction and Knight Therapeutics

Assuming the 90 days trading horizon Bird Construction is expected to under-perform the Knight Therapeutics. In addition to that, Bird Construction is 1.48 times more volatile than Knight Therapeutics. It trades about -0.14 of its total potential returns per unit of risk. Knight Therapeutics is currently generating about -0.12 per unit of volatility. If you would invest  537.00  in Knight Therapeutics on September 18, 2024 and sell it today you would lose (19.00) from holding Knight Therapeutics or give up 3.54% of portfolio value over 90 days.

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

Bird Construction  vs.  Knight Therapeutics

Bird Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bird Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bird Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Knight Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knight Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bird Construction and Knight Therapeutics

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

The idea behind Bird Construction and Knight Therapeutics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.