Correlation Between Alcoa Corp and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and Knight Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Knight Therapeutics, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Knight Therapeutics.
Diversification Opportunities for Alcoa Corp and Knight Therapeutics
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alcoa and Knight is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Knight Therapeutics go up and down completely randomly.
Pair Corralation between Alcoa Corp and Knight Therapeutics
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Knight Therapeutics. In addition to that, Alcoa Corp is 1.51 times more volatile than Knight Therapeutics. It trades about -0.06 of its total potential returns per unit of risk. Knight Therapeutics is currently generating about 0.33 per unit of volatility. If you would invest 361.00 in Knight Therapeutics on November 5, 2024 and sell it today you would earn a total of 35.00 from holding Knight Therapeutics or generate 9.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Alcoa Corp vs. Knight Therapeutics
Performance |
| Timeline |
| Alcoa Corp |
| Knight Therapeutics |
Alcoa Corp and Knight Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Knight Therapeutics
The main advantage of trading using opposite Alcoa Corp and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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.| Alcoa Corp vs. Agnico Eagle Mines | Alcoa Corp vs. Pan American Silver | Alcoa Corp vs. Wheaton Precious Metals | Alcoa Corp vs. Kinross Gold |
| Knight Therapeutics vs. Crescita Therapeutics | Knight Therapeutics vs. Cannara Biotech | Knight Therapeutics vs. Lowell Farms | Knight Therapeutics vs. Aion Therapeutic |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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