Correlation Between Eagle Plains and Knife River

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

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

Diversification Opportunities for Eagle Plains and Knife River

-0.22

Correlation Coefficient

Eagle Plains  Knife River

Very good diversification

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

Pair Corralation between Eagle Plains and Knife River

Assuming the 90 days horizon Eagle Plains is expected to generate 1.38 times less return on investment than Knife River. In addition to that, Eagle Plains is 4.75 times more volatile than Knife River. It trades about 0.01 of its total potential returns per unit of risk. Knife River is currently generating about 0.09 per unit of volatility. If you would invest  9,265  in Knife River on October 24, 2024 and sell it today you would earn a total of  1,223  from holding Knife River or generate 13.2% return on investment over 90 days.

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

Eagle Plains Resources  vs.  Knife River

Eagle Plains Resources

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Plains Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Eagle Plains may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Knife River

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Plains and Knife River

The main advantage of trading using opposite Eagle Plains and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Plains 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 Eagle Plains Resources 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..