Correlation Between Richelieu Hardware and Knight Therapeutics

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

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

Diversification Opportunities for Richelieu Hardware and Knight Therapeutics

-0.52

Correlation Coefficient

Richelieu Hardware  Knight Therapeutics

Excellent diversification

The 3 months correlation between Richelieu and Knight is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Richelieu Hardware and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Richelieu Hardware 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 Richelieu Hardware 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 Richelieu Hardware i.e., Richelieu Hardware and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Richelieu Hardware and Knight Therapeutics

Assuming the 90 days trading horizon Richelieu Hardware is expected to under-perform the Knight Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Richelieu Hardware is 1.12 times less risky than Knight Therapeutics. The stock trades about -0.13 of its potential returns per unit of risk. The Knight Therapeutics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  525.00  in Knight Therapeutics on December 30, 2024 and sell it today you would earn a total of  84.00  from holding Knight Therapeutics or generate 16.0% return on investment over 90 days.

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

Richelieu Hardware  vs.  Knight Therapeutics

Richelieu Hardware

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Knight Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Knight Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Richelieu Hardware and Knight Therapeutics

The main advantage of trading using opposite Richelieu Hardware and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Richelieu Hardware 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 Richelieu Hardware 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.