Correlation Between CRH PLC and Knife River

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

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

Diversification Opportunities for CRH PLC and Knife River

0.22

Correlation Coefficient

CRH PLC  Knife River

Modest diversification

The 3 months correlation between CRH and Knife is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CRH PLC ADR and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and CRH PLC 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 CRH PLC ADR 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 CRH PLC i.e., CRH PLC and Knife River go up and down completely randomly.

Pair Corralation between CRH PLC and Knife River

Considering the 90-day investment horizon CRH PLC ADR is expected to generate 0.8 times more return on investment than Knife River. However, CRH PLC ADR is 1.25 times less risky than Knife River. It trades about 0.01 of its potential returns per unit of risk. Knife River is currently generating about -0.03 per unit of risk. If you would invest  9,465  in CRH PLC ADR on December 26, 2024 and sell it today you would lose (7.00) from holding CRH PLC ADR or give up 0.07% of portfolio value over 90 days.

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

CRH PLC ADR  vs.  Knife River

CRH PLC ADR

Risk-Adjusted Performance

Insignificant

Over the last 90 days CRH PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRH PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Knife River is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CRH PLC and Knife River

The main advantage of trading using opposite CRH PLC and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRH PLC 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 CRH PLC ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.