Correlation Between Knife River and Freedom Bank

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

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

Diversification Opportunities for Knife River and Freedom Bank

0.17

Correlation Coefficient

Knife River  Freedom Bank

Average diversification

The 3 months correlation between Knife and Freedom is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Knife River i.e., Knife River and Freedom Bank go up and down completely randomly.

Pair Corralation between Knife River and Freedom Bank

Considering the 90-day investment horizon Knife River is expected to generate 1.95 times more return on investment than Freedom Bank. However, Knife River is 1.95 times more volatile than Freedom Bank of. It trades about 0.18 of its potential returns per unit of risk. Freedom Bank of is currently generating about 0.08 per unit of risk. If you would invest  8,399  in Knife River on September 13, 2024 and sell it today you would earn a total of  2,174  from holding Knife River or generate 25.88% 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.  Freedom Bank of

Knife River

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Freedom Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Bank of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Freedom Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Knife River and Freedom Bank

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

The idea behind Knife River and Freedom Bank of 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..