Correlation Between 70082LAB3 and Knife River

Can any of the company-specific risk be diversified away by investing in both 70082LAB3 and Knife River 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 70082LAB3 and Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US70082LAB36 and Knife River, you can compare the effects of market volatilities on 70082LAB3 and Knife River 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 70082LAB3 with a short position of Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of 70082LAB3 and Knife River.

Diversification Opportunities for 70082LAB3 and Knife River

0.39

Correlation Coefficient

70082LAB3  Knife River

Weak diversification

The 3 months correlation between 70082LAB3 and Knife is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding US70082LAB36 and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River and 70082LAB3 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 US70082LAB36 are associated (or correlated) with Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of 70082LAB3 i.e., 70082LAB3 and Knife River go up and down completely randomly.

Pair Corralation between 70082LAB3 and Knife River

Assuming the 90 days trading horizon US70082LAB36 is expected to under-perform the Knife River. But the bond apears to be less risky and, when comparing its historical volatility, US70082LAB36 is 3.35 times less risky than Knife River. The bond trades about -0.19 of its potential returns per unit of risk. The Knife River is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  10,238  in Knife River on December 2, 2024 and sell it today you would lose (670.00) from holding Knife River or give up 6.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.57%
Values	Daily Returns

US70082LAB36  vs.  Knife River

US70082LAB36

Risk-Adjusted Performance

Very Weak

Over the last 90 days US70082LAB36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for US70082LAB36 investors.

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Knife River is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with 70082LAB3 and Knife River

The main advantage of trading using opposite 70082LAB3 and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 70082LAB3 position performs unexpectedly, Knife River 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 Knife River will offset losses from the drop in Knife River's long position.

The idea behind US70082LAB36 and Knife River 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.