Correlation Between Knife River and Tecnoglass

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

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

Diversification Opportunities for Knife River and Tecnoglass

0.8

Correlation Coefficient

Knife River  Tecnoglass

Very poor diversification

The 3 months correlation between Knife and Tecnoglass is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Tecnoglass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnoglass 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 Tecnoglass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnoglass has no effect on the direction of Knife River i.e., Knife River and Tecnoglass go up and down completely randomly.

Pair Corralation between Knife River and Tecnoglass

Considering the 90-day investment horizon Knife River is expected to generate 1.43 times less return on investment than Tecnoglass. In addition to that, Knife River is 1.02 times more volatile than Tecnoglass. It trades about 0.25 of its total potential returns per unit of risk. Tecnoglass is currently generating about 0.37 per unit of volatility. If you would invest  7,385  in Tecnoglass on September 19, 2024 and sell it today you would earn a total of  1,071  from holding Tecnoglass or generate 14.5% 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.  Tecnoglass

Knife River

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Tecnoglass

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnoglass are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent essential indicators, Tecnoglass unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Tecnoglass

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

The idea behind Knife River and Tecnoglass 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.