Correlation Between Know IT and Proact IT

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

By analyzing existing cross correlation between Know IT AB and Proact IT Group, you can compare the effects of market volatilities on Know IT and Proact IT 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 Know IT with a short position of Proact IT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know IT and Proact IT.

Diversification Opportunities for Know IT and Proact IT

0.05

Correlation Coefficient

Know IT  Proact IT

Significant diversification

The 3 months correlation between Know and Proact is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and Proact IT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proact IT Group and Know IT 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 Know IT AB are associated (or correlated) with Proact IT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proact IT Group has no effect on the direction of Know IT i.e., Know IT and Proact IT go up and down completely randomly.

Pair Corralation between Know IT and Proact IT

Assuming the 90 days trading horizon Know IT AB is expected to generate 1.09 times more return on investment than Proact IT. However, Know IT is 1.09 times more volatile than Proact IT Group. It trades about 0.11 of its potential returns per unit of risk. Proact IT Group is currently generating about 0.04 per unit of risk. If you would invest  13,800  in Know IT AB on December 30, 2024 and sell it today you would earn a total of  1,680  from holding Know IT AB or generate 12.17% return on investment over 90 days.

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

Know IT AB  vs.  Proact IT Group

Know IT AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Know IT AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Know IT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Proact IT Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Proact IT Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Proact IT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Know IT and Proact IT

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

The idea behind Know IT AB and Proact IT Group 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.