Correlation Between Knife River and Dreyfus Research

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

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

Diversification Opportunities for Knife River and Dreyfus Research

0.89

Correlation Coefficient

Knife River  Dreyfus Research

Very poor diversification

The 3 months correlation between Knife and Dreyfus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Dreyfus Research Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Research Growth 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 Dreyfus Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Research Growth has no effect on the direction of Knife River i.e., Knife River and Dreyfus Research go up and down completely randomly.

Pair Corralation between Knife River and Dreyfus Research

Considering the 90-day investment horizon Knife River is expected to generate 1.64 times more return on investment than Dreyfus Research. However, Knife River is 1.64 times more volatile than Dreyfus Research Growth. It trades about -0.06 of its potential returns per unit of risk. Dreyfus Research Growth is currently generating about -0.12 per unit of risk. If you would invest  10,263  in Knife River on December 21, 2024 and sell it today you would lose (1,179) from holding Knife River or give up 11.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Knife River  vs.  Dreyfus Research Growth

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.

Dreyfus Research Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Research Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Knife River and Dreyfus Research

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

The idea behind Knife River and Dreyfus Research Growth 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.