Correlation Between James Hardie and Knife River

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

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

Diversification Opportunities for James Hardie and Knife River

-0.45

Correlation Coefficient

James Hardie  Knife River

Very good diversification

The 3 months correlation between James and Knife is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and James Hardie 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 James Hardie Industries are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of James Hardie i.e., James Hardie and Knife River go up and down completely randomly.

Pair Corralation between James Hardie and Knife River

Considering the 90-day investment horizon James Hardie Industries is expected to under-perform the Knife River. But the stock apears to be less risky and, when comparing its historical volatility, James Hardie Industries is 1.38 times less risky than Knife River. The stock trades about -0.33 of its potential returns per unit of risk. The Knife River is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,265  in Knife River on September 23, 2024 and sell it today you would earn a total of  306.00  from holding Knife River or generate 2.98% return on investment over 90 days.

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

James Hardie Industries  vs.  Knife River

James Hardie Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Knife River

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with James Hardie and Knife River

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

The idea behind James Hardie Industries and Knife River 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.