Correlation Between Knife River and CRH PLC

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

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

Diversification Opportunities for Knife River and CRH PLC

0.14

Correlation Coefficient

Knife River  CRH PLC

Average diversification

The 3 months correlation between Knife and CRH is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and CRH PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH PLC ADR 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 CRH PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH PLC ADR has no effect on the direction of Knife River i.e., Knife River and CRH PLC go up and down completely randomly.

Pair Corralation between Knife River and CRH PLC

Considering the 90-day investment horizon Knife River is expected to under-perform the CRH PLC. In addition to that, Knife River is 1.28 times more volatile than CRH PLC ADR. It trades about -0.03 of its total potential returns per unit of risk. CRH PLC ADR is currently generating about 0.04 per unit of volatility. If you would invest  9,465  in CRH PLC ADR on December 26, 2024 and sell it today you would earn a total of  396.00  from holding CRH PLC ADR or generate 4.18% return on investment over 90 days.

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

Knife River  vs.  CRH PLC ADR

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 nearly stable basic indicators, Knife River is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CRH PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, CRH PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Knife River and CRH PLC

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

The idea behind Knife River and CRH PLC ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..