Correlation Between Knight Therapeutics and EcoSynthetix

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

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

Diversification Opportunities for Knight Therapeutics and EcoSynthetix

0.52

Correlation Coefficient

Knight Therapeutics  EcoSynthetix

Very weak diversification

The 3 months correlation between Knight and EcoSynthetix is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and EcoSynthetix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EcoSynthetix and Knight Therapeutics 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 Knight Therapeutics are associated (or correlated) with EcoSynthetix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EcoSynthetix has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and EcoSynthetix go up and down completely randomly.

Pair Corralation between Knight Therapeutics and EcoSynthetix

Assuming the 90 days trading horizon Knight Therapeutics is expected to under-perform the EcoSynthetix. But the stock apears to be less risky and, when comparing its historical volatility, Knight Therapeutics is 1.17 times less risky than EcoSynthetix. The stock trades about -0.01 of its potential returns per unit of risk. The EcoSynthetix is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  420.00  in EcoSynthetix on October 22, 2024 and sell it today you would lose (6.00) from holding EcoSynthetix or give up 1.43% of portfolio value over 90 days.

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

Knight Therapeutics  vs.  EcoSynthetix

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 very healthy fundamental indicators, Knight Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

EcoSynthetix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EcoSynthetix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, EcoSynthetix is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Knight Therapeutics and EcoSynthetix

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

The idea behind Knight Therapeutics and EcoSynthetix 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.