Correlation Between Knife River and Vanguard Target

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

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

Diversification Opportunities for Knife River and Vanguard Target

0.42

Correlation Coefficient

Knife River  Vanguard Target

Very weak diversification

The 3 months correlation between Knife and Vanguard is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Knife River i.e., Knife River and Vanguard Target go up and down completely randomly.

Pair Corralation between Knife River and Vanguard Target

Considering the 90-day investment horizon Knife River is expected to under-perform the Vanguard Target. In addition to that, Knife River is 3.59 times more volatile than Vanguard Target Retirement. It trades about -0.06 of its total potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.02 per unit of volatility. If you would invest  4,997  in Vanguard Target Retirement on December 28, 2024 and sell it today you would earn a total of  31.00  from holding Vanguard Target Retirement or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Knife River  vs.  Vanguard Target Retirement

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 uncertain 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.

Vanguard Target Reti

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Knife River and Vanguard Target

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

The idea behind Knife River and Vanguard Target Retirement 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.