Correlation Between HLS Therapeutics and Knight Therapeutics

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

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

Diversification Opportunities for HLS Therapeutics and Knight Therapeutics

0.67

Correlation Coefficient

HLS Therapeutics  Knight Therapeutics

Poor diversification

The 3 months correlation between HLS and Knight is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HLS Therapeutics and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and HLS 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 HLS Therapeutics are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of HLS Therapeutics i.e., HLS Therapeutics and Knight Therapeutics go up and down completely randomly.

Pair Corralation between HLS Therapeutics and Knight Therapeutics

Assuming the 90 days trading horizon HLS Therapeutics is expected to generate 1.08 times more return on investment than Knight Therapeutics. However, HLS Therapeutics is 1.08 times more volatile than Knight Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Knight Therapeutics is currently generating about 0.12 per unit of risk. If you would invest  390.00  in HLS Therapeutics on December 28, 2024 and sell it today you would earn a total of  62.00  from holding HLS Therapeutics or generate 15.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

HLS Therapeutics  vs.  Knight Therapeutics

HLS Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HLS Therapeutics are ranked lower than 9 (%) 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.

Knight Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 9 (%) 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.

Pair Trading with HLS Therapeutics and Knight Therapeutics

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

The idea behind HLS Therapeutics and Knight 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.