Correlation Between Knowles Cor and AudioCodes

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

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

Diversification Opportunities for Knowles Cor and AudioCodes

-0.39

Correlation Coefficient

Knowles Cor  AudioCodes

Very good diversification

The 3 months correlation between Knowles and AudioCodes is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Knowles Cor 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 Knowles Cor are associated (or correlated) with AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Knowles Cor i.e., Knowles Cor and AudioCodes go up and down completely randomly.

Pair Corralation between Knowles Cor and AudioCodes

Allowing for the 90-day total investment horizon Knowles Cor is expected to under-perform the AudioCodes. But the stock apears to be less risky and, when comparing its historical volatility, Knowles Cor is 1.77 times less risky than AudioCodes. The stock trades about -0.15 of its potential returns per unit of risk. The AudioCodes is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  930.00  in AudioCodes on November 28, 2024 and sell it today you would earn a total of  198.00  from holding AudioCodes or generate 21.29% return on investment over 90 days.

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

Knowles Cor  vs.  AudioCodes

Knowles Cor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knowles Cor 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 basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

AudioCodes

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AudioCodes are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, AudioCodes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knowles Cor and AudioCodes

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

The idea behind Knowles Cor and AudioCodes 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.