Correlation Between Cementos Pacasmayo and Knife River

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

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

Diversification Opportunities for Cementos Pacasmayo and Knife River

0.8

Correlation Coefficient

Cementos Pacasmayo  Knife River

Very poor diversification

The 3 months correlation between Cementos and Knife is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and Knife River go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Knife River

Given the investment horizon of 90 days Cementos Pacasmayo is expected to generate 2.71 times less return on investment than Knife River. But when comparing it to its historical volatility, Cementos Pacasmayo SAA is 1.21 times less risky than Knife River. It trades about 0.05 of its potential returns per unit of risk. Knife River is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,765  in Knife River on September 20, 2024 and sell it today you would earn a total of  404.00  from holding Knife River or generate 4.14% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  Knife River

Cementos Pacasmayo SAA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Cementos Pacasmayo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Knife River

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Knife River may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cementos Pacasmayo and Knife River

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

The idea behind Cementos Pacasmayo SAA and Knife River 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.