Correlation Between Knife River and MSCI ACWI

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

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

Diversification Opportunities for Knife River and MSCI ACWI

0.87

Correlation Coefficient

Knife River  MSCI ACWI

Very poor diversification

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

Pair Corralation between Knife River and MSCI ACWI

Considering the 90-day investment horizon Knife River is expected to generate 11.62 times more return on investment than MSCI ACWI. However, Knife River is 11.62 times more volatile than MSCI ACWI exAUCONSUMER. It trades about 0.17 of its potential returns per unit of risk. MSCI ACWI exAUCONSUMER is currently generating about 0.14 per unit of risk. If you would invest  8,200  in Knife River on September 12, 2024 and sell it today you would earn a total of  2,081  from holding Knife River or generate 25.38% 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.  MSCI ACWI exAUCONSUMER

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.

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Knife River and MSCI ACWI

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

The idea behind Knife River and MSCI ACWI exAUCONSUMER 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.