Correlation Between Knight Therapeutics and Biosyent

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

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

Diversification Opportunities for Knight Therapeutics and Biosyent

-0.68

Correlation Coefficient

Knight Therapeutics  Biosyent

Excellent diversification

The 3 months correlation between Knight and Biosyent is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Biosyent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biosyent 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 Biosyent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biosyent has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Biosyent go up and down completely randomly.

Pair Corralation between Knight Therapeutics and Biosyent

Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 0.98 times more return on investment than Biosyent. However, Knight Therapeutics is 1.02 times less risky than Biosyent. It trades about 0.04 of its potential returns per unit of risk. Biosyent is currently generating about -0.01 per unit of risk. If you would invest  534.00  in Knight Therapeutics on December 1, 2024 and sell it today you would earn a total of  15.00  from holding Knight Therapeutics or generate 2.81% return on investment over 90 days.

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

Knight Therapeutics  vs.  Biosyent

Knight Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Biosyent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Biosyent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Biosyent is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Knight Therapeutics and Biosyent

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

The idea behind Knight Therapeutics and Biosyent 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.