Correlation Between Tetragon Financial and Knights Group

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

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

Diversification Opportunities for Tetragon Financial and Knights Group

-0.8

Correlation Coefficient

Tetragon Financial  Knights Group

Pay attention - limited upside

The 3 months correlation between Tetragon and Knights is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tetragon Financial Group 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 Tetragon Financial 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 Tetragon Financial Group 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 Tetragon Financial i.e., Tetragon Financial and Knights Group go up and down completely randomly.

Pair Corralation between Tetragon Financial and Knights Group

Assuming the 90 days trading horizon Tetragon Financial Group is expected to generate 0.4 times more return on investment than Knights Group. However, Tetragon Financial Group is 2.48 times less risky than Knights Group. It trades about 0.25 of its potential returns per unit of risk. Knights Group Holdings is currently generating about 0.05 per unit of risk. If you would invest  1,280  in Tetragon Financial Group on October 10, 2024 and sell it today you would earn a total of  150.00  from holding Tetragon Financial Group or generate 11.72% return on investment over 90 days.

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

Tetragon Financial Group  vs.  Knights Group Holdings

Tetragon Financial

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tetragon Financial Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tetragon Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Tetragon Financial and Knights Group

The main advantage of trading using opposite Tetragon Financial and Knights Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tetragon Financial 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 Tetragon Financial Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..