Correlation Between Premium Income and Knight Therapeutics

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

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

Diversification Opportunities for Premium Income and Knight Therapeutics

-0.41

Correlation Coefficient

Premium Income  Knight Therapeutics

Very good diversification

The 3 months correlation between Premium and Knight is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Premium Income and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Premium Income 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 Premium Income are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of Premium Income i.e., Premium Income and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Premium Income and Knight Therapeutics

Assuming the 90 days trading horizon Premium Income is expected to under-perform the Knight Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Premium Income is 1.12 times less risky than Knight Therapeutics. The stock trades about -0.24 of its potential returns per unit of risk. The Knight Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  534.00  in Knight Therapeutics on December 2, 2024 and sell it today you would earn a total of  15.00  from holding Knight Therapeutics or generate 2.81% return on investment over 90 days.

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

Premium Income  vs.  Knight Therapeutics

Premium Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Knight Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Knight Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Premium Income and Knight Therapeutics

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

The idea behind Premium Income and Knight Therapeutics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.