Correlation Between Target Healthcare and Knights Group

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

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

Diversification Opportunities for Target Healthcare and Knights Group

-0.05

Correlation Coefficient

Target Healthcare  Knights Group

Good diversification

The 3 months correlation between Target and Knights is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT 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 Target Healthcare 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and Knights Group go up and down completely randomly.

Pair Corralation between Target Healthcare and Knights Group

Assuming the 90 days trading horizon Target Healthcare REIT is expected to under-perform the Knights Group. But the stock apears to be less risky and, when comparing its historical volatility, Target Healthcare REIT is 1.45 times less risky than Knights Group. The stock trades about -0.12 of its potential returns per unit of risk. The Knights Group Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  10,550  in Knights Group Holdings on October 27, 2024 and sell it today you would earn a total of  1,250  from holding Knights Group Holdings or generate 11.85% return on investment over 90 days.

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

Target Healthcare REIT  vs.  Knights Group Holdings

Target Healthcare REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Knights Group Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Knights Group Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Target Healthcare and Knights Group

The main advantage of trading using opposite Target Healthcare and Knights Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Healthcare 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 Target Healthcare REIT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.