Correlation Between Knight Therapeutics and HLS Therapeutics

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

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

Diversification Opportunities for Knight Therapeutics and HLS Therapeutics

0.05

Correlation Coefficient

Knight Therapeutics  HLS Therapeutics

Significant diversification

The 3 months correlation between Knight and HLS is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and HLS Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HLS Therapeutics 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 HLS Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HLS Therapeutics has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and HLS Therapeutics go up and down completely randomly.

Pair Corralation between Knight Therapeutics and HLS Therapeutics

Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 0.45 times more return on investment than HLS Therapeutics. However, Knight Therapeutics is 2.2 times less risky than HLS Therapeutics. It trades about 0.0 of its potential returns per unit of risk. HLS Therapeutics is currently generating about -0.05 per unit of risk. If you would invest  541.00  in Knight Therapeutics on September 3, 2024 and sell it today you would lose (14.00) from holding Knight Therapeutics or give up 2.59% of portfolio value over 90 days.

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

Knight Therapeutics  vs.  HLS Therapeutics

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.

HLS Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HLS Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HLS Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Therapeutics and HLS Therapeutics

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

The idea behind Knight Therapeutics and HLS Therapeutics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.