Correlation Between Quant and KNC

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

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

Diversification Opportunities for Quant and KNC

0.89

Correlation Coefficient

Quant  KNC

Very poor diversification

The 3 months correlation between Quant and KNC is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Quant and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC and Quant 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 Quant are associated (or correlated) with KNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNC has no effect on the direction of Quant i.e., Quant and KNC go up and down completely randomly.

Pair Corralation between Quant and KNC

Assuming the 90 days trading horizon Quant is expected to under-perform the KNC. In addition to that, Quant is 1.04 times more volatile than KNC. It trades about -0.11 of its total potential returns per unit of risk. KNC is currently generating about -0.11 per unit of volatility. If you would invest  53.00  in KNC on December 29, 2024 and sell it today you would lose (17.00) from holding KNC or give up 32.08% of portfolio value over 90 days.

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

Quant  vs.  KNC

Quant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Quant shareholders.

KNC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for KNC shareholders.

Pair Trading with Quant and KNC

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

The idea behind Quant and KNC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.