Correlation Between Knife River and Everspin Technologies

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

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

Diversification Opportunities for Knife River and Everspin Technologies

0.39

Correlation Coefficient

Knife River  Everspin Technologies

Weak diversification

The 3 months correlation between Knife and Everspin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Everspin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everspin Technologies 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 Everspin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everspin Technologies has no effect on the direction of Knife River i.e., Knife River and Everspin Technologies go up and down completely randomly.

Pair Corralation between Knife River and Everspin Technologies

Considering the 90-day investment horizon Knife River is expected to under-perform the Everspin Technologies. In addition to that, Knife River is 1.02 times more volatile than Everspin Technologies. It trades about -0.06 of its total potential returns per unit of risk. Everspin Technologies is currently generating about -0.06 per unit of volatility. If you would invest  614.00  in Everspin Technologies on November 28, 2024 and sell it today you would lose (59.00) from holding Everspin Technologies or give up 9.61% of portfolio value over 90 days.

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

Knife River  vs.  Everspin Technologies

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.

Everspin Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everspin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Knife River and Everspin Technologies

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

The idea behind Knife River and Everspin Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.