Correlation Between Knights Group and New Residential

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

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

Diversification Opportunities for Knights Group and New Residential

-0.6

Correlation Coefficient

Knights Group  New Residential

Excellent diversification

The 3 months correlation between Knights and New is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Knights Group Holdings and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve and Knights Group 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 Knights Group Holdings are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Knights Group i.e., Knights Group and New Residential go up and down completely randomly.

Pair Corralation between Knights Group and New Residential

Assuming the 90 days trading horizon Knights Group Holdings is expected to generate 1.65 times more return on investment than New Residential. However, Knights Group is 1.65 times more volatile than New Residential Investment. It trades about 0.24 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.0 per unit of risk. If you would invest  10,700  in Knights Group Holdings on October 11, 2024 and sell it today you would earn a total of  1,400  from holding Knights Group Holdings or generate 13.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Knights Group Holdings  vs.  New Residential Investment

Knights Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knights Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Knights Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

New Residential Inve

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Knights Group and New Residential

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

The idea behind Knights Group Holdings and New Residential Investment 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.