Correlation Between Knife River and 70082LAB3

Can any of the company-specific risk be diversified away by investing in both Knife River and 70082LAB3 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 70082LAB3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Knife River and US70082LAB36, you can compare the effects of market volatilities on Knife River and 70082LAB3 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 70082LAB3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and 70082LAB3.

Diversification Opportunities for Knife River and 70082LAB3

0.39

Correlation Coefficient

Knife River  70082LAB3

Weak diversification

The 3 months correlation between Knife and 70082LAB3 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and US70082LAB36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US70082LAB36 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 70082LAB3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US70082LAB36 has no effect on the direction of Knife River i.e., Knife River and 70082LAB3 go up and down completely randomly.

Pair Corralation between Knife River and 70082LAB3

Considering the 90-day investment horizon Knife River is expected to generate 3.35 times more return on investment than 70082LAB3. However, Knife River is 3.35 times more volatile than US70082LAB36. It trades about -0.03 of its potential returns per unit of risk. US70082LAB36 is currently generating about -0.19 per unit of risk. If you would invest  10,238  in Knife River on December 2, 2024 and sell it today you would lose (670.00) from holding Knife River or give up 6.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.57%
Values	Daily Returns

Knife River  vs.  US70082LAB36

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 nearly stable basic indicators, Knife River is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

US70082LAB36

Risk-Adjusted Performance

Very Weak

Over the last 90 days US70082LAB36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for US70082LAB36 investors.

Pair Trading with Knife River and 70082LAB3

The main advantage of trading using opposite Knife River and 70082LAB3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, 70082LAB3 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 70082LAB3 will offset losses from the drop in 70082LAB3's long position.

The idea behind Knife River and US70082LAB36 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.