Correlation Between Laird Superfood and Knife River

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

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

Diversification Opportunities for Laird Superfood and Knife River

0.34

Correlation Coefficient

Laird Superfood  Knife River

Weak diversification

The 3 months correlation between Laird and Knife is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Laird Superfood and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and Laird Superfood 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 Laird Superfood are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Laird Superfood i.e., Laird Superfood and Knife River go up and down completely randomly.

Pair Corralation between Laird Superfood and Knife River

Considering the 90-day investment horizon Laird Superfood is expected to under-perform the Knife River. In addition to that, Laird Superfood is 1.49 times more volatile than Knife River. It trades about -0.16 of its total potential returns per unit of risk. Knife River is currently generating about -0.11 per unit of volatility. If you would invest  10,228  in Knife River on November 29, 2024 and sell it today you would lose (690.00) from holding Knife River or give up 6.75% of portfolio value over 90 days.

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

Laird Superfood  vs.  Knife River

Laird Superfood

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laird Superfood has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Laird Superfood and Knife River

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

The idea behind Laird Superfood and Knife River 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.