Correlation Between Dupont De and Know IT

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

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

Diversification Opportunities for Dupont De and Know IT

0.21

Correlation Coefficient

Dupont De  Know IT

Modest diversification

The 3 months correlation between Dupont and Know is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Know IT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know IT AB and Dupont De 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 Dupont De Nemours are associated (or correlated) with Know IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know IT AB has no effect on the direction of Dupont De i.e., Dupont De and Know IT go up and down completely randomly.

Pair Corralation between Dupont De and Know IT

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Know IT. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.2 times less risky than Know IT. The stock trades about -0.02 of its potential returns per unit of risk. The Know IT AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,640  in Know IT AB on December 1, 2024 and sell it today you would earn a total of  1,600  from holding Know IT AB or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Dupont De Nemours  vs.  Know IT AB

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Know IT AB

Risk-Adjusted Performance

OK

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

Pair Trading with Dupont De and Know IT

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

The idea behind Dupont De Nemours and Know IT AB 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.