Correlation Between Knowles Cor and Wireless Telecom

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

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

Diversification Opportunities for Knowles Cor and Wireless Telecom

0.68

Correlation Coefficient

Knowles Cor  Wireless Telecom

Poor diversification

The 3 months correlation between Knowles and Wireless is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Wireless Telecom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wireless Telecom 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 Wireless Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wireless Telecom has no effect on the direction of Knowles Cor i.e., Knowles Cor and Wireless Telecom go up and down completely randomly.

Pair Corralation between Knowles Cor and Wireless Telecom

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 3.61 times less return on investment than Wireless Telecom. But when comparing it to its historical volatility, Knowles Cor is 1.45 times less risky than Wireless Telecom. It trades about 0.02 of its potential returns per unit of risk. Wireless Telecom Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Wireless Telecom Group on October 11, 2024 and sell it today you would earn a total of  25.00  from holding Wireless Telecom Group or generate 13.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.6%
Values	Daily Returns

Knowles Cor  vs.  Wireless Telecom Group

Knowles Cor

Risk-Adjusted Performance

9 of 100

OK

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

Wireless Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wireless Telecom Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wireless Telecom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Knowles Cor and Wireless Telecom

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

The idea behind Knowles Cor and Wireless Telecom Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.