Correlation Between Suncor Energy and Knight Therapeutics

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

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

Diversification Opportunities for Suncor Energy and Knight Therapeutics

-0.77

Correlation Coefficient

Suncor Energy  Knight Therapeutics

Pay attention - limited upside

The 3 months correlation between Suncor and Knight is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Suncor Energy 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 Suncor Energy 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 Suncor Energy i.e., Suncor Energy and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Suncor Energy and Knight Therapeutics

Assuming the 90 days horizon Suncor Energy is expected to generate 0.76 times more return on investment than Knight Therapeutics. However, Suncor Energy is 1.31 times less risky than Knight Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Knight Therapeutics is currently generating about -0.02 per unit of risk. If you would invest  5,343  in Suncor Energy on August 31, 2024 and sell it today you would earn a total of  228.00  from holding Suncor Energy or generate 4.27% return on investment over 90 days.

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

Suncor Energy  vs.  Knight Therapeutics

Suncor Energy

Risk-Adjusted Performance

3 of 100

Insignificant

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

Knight Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knight Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Suncor Energy and Knight Therapeutics

The main advantage of trading using opposite Suncor Energy and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor Energy 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 Suncor Energy 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 Stocks Directory module to find actively traded stocks across global markets.