Correlation Between Knife River and Clearfield

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

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

Diversification Opportunities for Knife River and Clearfield

0.81

Correlation Coefficient

Knife River  Clearfield

Very poor diversification

The 3 months correlation between Knife and Clearfield is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield and Knife River 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 Knife River are associated (or correlated) with Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Knife River i.e., Knife River and Clearfield go up and down completely randomly.

Pair Corralation between Knife River and Clearfield

Considering the 90-day investment horizon Knife River is expected to under-perform the Clearfield. But the stock apears to be less risky and, when comparing its historical volatility, Knife River is 1.02 times less risky than Clearfield. The stock trades about -0.06 of its potential returns per unit of risk. The Clearfield is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,123  in Clearfield on December 30, 2024 and sell it today you would lose (130.00) from holding Clearfield or give up 4.16% of portfolio value over 90 days.

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

Knife River  vs.  Clearfield

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Clearfield

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Knife River and Clearfield

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

The idea behind Knife River and Clearfield 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.