Correlation Between IShares Dow and Knights Group

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

By analyzing existing cross correlation between iShares Dow Jones and Knights Group Holdings, you can compare the effects of market volatilities on IShares Dow and Knights Group 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 IShares Dow with a short position of Knights Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Dow and Knights Group.

Diversification Opportunities for IShares Dow and Knights Group

0.14

Correlation Coefficient

IShares Dow  Knights Group

Average diversification

The 3 months correlation between IShares and Knights is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dow Jones and Knights Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knights Group Holdings and IShares Dow 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 iShares Dow Jones are associated (or correlated) with Knights Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knights Group Holdings has no effect on the direction of IShares Dow i.e., IShares Dow and Knights Group go up and down completely randomly.

Pair Corralation between IShares Dow and Knights Group

Assuming the 90 days trading horizon IShares Dow is expected to generate 28.8 times less return on investment than Knights Group. But when comparing it to its historical volatility, iShares Dow Jones is 2.09 times less risky than Knights Group. It trades about 0.02 of its potential returns per unit of risk. Knights Group Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  11,000  in Knights Group Holdings on December 24, 2024 and sell it today you would earn a total of  3,200  from holding Knights Group Holdings or generate 29.09% return on investment over 90 days.

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

iShares Dow Jones  vs.  Knights Group Holdings

iShares Dow Jones

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Dow Jones are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Dow is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Knights Group Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knights Group Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Knights Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Dow and Knights Group

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

The idea behind iShares Dow Jones and Knights Group Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.