Correlation Between Knife River and Loma Negra

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

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

Diversification Opportunities for Knife River and Loma Negra

0.87

Correlation Coefficient

Knife River  Loma Negra

Very poor diversification

The 3 months correlation between Knife and Loma is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania 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 Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Knife River i.e., Knife River and Loma Negra go up and down completely randomly.

Pair Corralation between Knife River and Loma Negra

Considering the 90-day investment horizon Knife River is expected to generate 3.95 times less return on investment than Loma Negra. In addition to that, Knife River is 1.11 times more volatile than Loma Negra Compania. It trades about 0.1 of its total potential returns per unit of risk. Loma Negra Compania is currently generating about 0.46 per unit of volatility. If you would invest  908.00  in Loma Negra Compania on September 2, 2024 and sell it today you would earn a total of  279.00  from holding Loma Negra Compania or generate 30.73% return on investment over 90 days.

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

Knife River  vs.  Loma Negra Compania

Knife River

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Loma Negra Compania

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Loma Negra Compania are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Loma Negra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Loma Negra

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

The idea behind Knife River and Loma Negra Compania 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.