Correlation Between Big 5 and Knowles
Can any of the company-specific risk be diversified away by investing in both Big 5 and Knowles 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 Big 5 and Knowles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and Knowles, you can compare the effects of market volatilities on Big 5 and Knowles 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 Big 5 with a short position of Knowles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Knowles.
Diversification Opportunities for Big 5 and Knowles
Excellent diversification
The 3 months correlation between Big and Knowles is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Knowles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles and Big 5 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 Big 5 Sporting are associated (or correlated) with Knowles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles has no effect on the direction of Big 5 i.e., Big 5 and Knowles go up and down completely randomly.
Pair Corralation between Big 5 and Knowles
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Knowles. In addition to that, Big 5 is 2.47 times more volatile than Knowles. It trades about -0.07 of its total potential returns per unit of risk. Knowles is currently generating about 0.06 per unit of volatility. If you would invest 1,480 in Knowles on September 15, 2024 and sell it today you would earn a total of 390.00 from holding Knowles or generate 26.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Big 5 Sporting vs. Knowles
Performance |
| Timeline |
| Big 5 Sporting |
| Knowles |
Big 5 and Knowles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and Knowles
The main advantage of trading using opposite Big 5 and Knowles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Knowles 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 Knowles will offset losses from the drop in Knowles' long position.| Big 5 vs. Superior Plus Corp | Big 5 vs. SIVERS SEMICONDUCTORS AB | Big 5 vs. NorAm Drilling AS | Big 5 vs. Norsk Hydro ASA |
| Knowles vs. SCIENCE IN SPORT | Knowles vs. Strategic Investments AS | Knowles vs. EAT WELL INVESTMENT | Knowles vs. Big 5 Sporting |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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