Correlation Between Knife River and LiCycle Holdings

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

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

Diversification Opportunities for Knife River and LiCycle Holdings

-0.02

Correlation Coefficient

Knife River  LiCycle Holdings

Good diversification

The 3 months correlation between Knife and LiCycle is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and LiCycle Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiCycle Holdings Corp 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 LiCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiCycle Holdings Corp has no effect on the direction of Knife River i.e., Knife River and LiCycle Holdings go up and down completely randomly.

Pair Corralation between Knife River and LiCycle Holdings

Considering the 90-day investment horizon Knife River is expected to generate 0.32 times more return on investment than LiCycle Holdings. However, Knife River is 3.14 times less risky than LiCycle Holdings. It trades about -0.06 of its potential returns per unit of risk. LiCycle Holdings Corp is currently generating about -0.15 per unit of risk. If you would invest  10,350  in Knife River on November 28, 2024 and sell it today you would lose (1,028) from holding Knife River or give up 9.93% of portfolio value over 90 days.

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

Knife River  vs.  LiCycle Holdings Corp

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 weak 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.

LiCycle Holdings Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LiCycle Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Knife River and LiCycle Holdings

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

The idea behind Knife River and LiCycle Holdings Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.