Correlation Between SPDR SP and Knights Group

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

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

Diversification Opportunities for SPDR SP and Knights Group

0.18

Correlation Coefficient

SPDR SP  Knights Group

Average diversification

The 3 months correlation between SPDR and Knights is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials and Knights Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knights Group Holdings and SPDR SP 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 SPDR SP Materials are associated (or correlated) with Knights Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knights Group Holdings has no effect on the direction of SPDR SP i.e., SPDR SP and Knights Group go up and down completely randomly.

Pair Corralation between SPDR SP and Knights Group

Assuming the 90 days trading horizon SPDR SP Materials is expected to under-perform the Knights Group. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP Materials is 3.47 times less risky than Knights Group. The etf trades about -0.09 of its potential returns per unit of risk. The Knights Group Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Knights Group Holdings on October 24, 2024 and sell it today you would lose (500.00) from holding Knights Group Holdings or give up 3.97% of portfolio value over 90 days.

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

SPDR SP Materials  vs.  Knights Group Holdings

SPDR SP Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Knights Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knights Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Knights Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SP and Knights Group

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

The idea behind SPDR SP Materials and Knights Group Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..