Correlation Between Knight Therapeutics and Royal Canadian

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

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

Diversification Opportunities for Knight Therapeutics and Royal Canadian

0.81

Correlation Coefficient

Knight Therapeutics  Royal Canadian

Very poor diversification

The 3 months correlation between Knight and Royal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Royal Canadian Mint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Canadian Mint 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 Royal Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Canadian Mint has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Royal Canadian go up and down completely randomly.

Pair Corralation between Knight Therapeutics and Royal Canadian

Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 1.28 times less return on investment than Royal Canadian. In addition to that, Knight Therapeutics is 2.19 times more volatile than Royal Canadian Mint. It trades about 0.14 of its total potential returns per unit of risk. Royal Canadian Mint is currently generating about 0.38 per unit of volatility. If you would invest  3,925  in Royal Canadian Mint on December 29, 2024 and sell it today you would earn a total of  872.00  from holding Royal Canadian Mint or generate 22.22% return on investment over 90 days.

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

Knight Therapeutics  vs.  Royal Canadian Mint

Knight Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Knight Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Royal Canadian Mint

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Royal Canadian displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knight Therapeutics and Royal Canadian

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

The idea behind Knight Therapeutics and Royal Canadian Mint 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.