Correlation Between Knowles Cor and Comtech Telecommunicatio

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

By analyzing existing cross correlation between Knowles Cor and Comtech Telecommunications Corp, you can compare the effects of market volatilities on Knowles Cor and Comtech Telecommunicatio 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 Comtech Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and Comtech Telecommunicatio.

Diversification Opportunities for Knowles Cor and Comtech Telecommunicatio

-0.32

Correlation Coefficient

Knowles Cor  Comtech Telecommunicatio

Very good diversification

The 3 months correlation between Knowles and Comtech is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Comtech Telecommunications Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comtech Telecommunicatio 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 Comtech Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comtech Telecommunicatio has no effect on the direction of Knowles Cor i.e., Knowles Cor and Comtech Telecommunicatio go up and down completely randomly.

Pair Corralation between Knowles Cor and Comtech Telecommunicatio

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 4.61 times less return on investment than Comtech Telecommunicatio. But when comparing it to its historical volatility, Knowles Cor is 3.35 times less risky than Comtech Telecommunicatio. It trades about 0.04 of its potential returns per unit of risk. Comtech Telecommunications Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  316.00  in Comtech Telecommunications Corp on August 30, 2024 and sell it today you would earn a total of  34.00  from holding Comtech Telecommunications Corp or generate 10.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Knowles Cor  vs.  Comtech Telecommunications Cor

Knowles Cor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Knowles Cor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Comtech Telecommunicatio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Comtech Telecommunications Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Comtech Telecommunicatio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knowles Cor and Comtech Telecommunicatio

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

The idea behind Knowles Cor and Comtech Telecommunications Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.