Correlation Between Knight Therapeutics and Covalon Technologies
Can any of the company-specific risk be diversified away by investing in both Knight Therapeutics and Covalon Technologies 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 Knight Therapeutics and Covalon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Therapeutics and Covalon Technologies, you can compare the effects of market volatilities on Knight Therapeutics and Covalon Technologies 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 Knight Therapeutics with a short position of Covalon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Covalon Technologies.
Diversification Opportunities for Knight Therapeutics and Covalon Technologies
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Knight and Covalon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and Knight Therapeutics 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 Knight Therapeutics are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Covalon Technologies go up and down completely randomly.
Pair Corralation between Knight Therapeutics and Covalon Technologies
Assuming the 90 days trading horizon Knight Therapeutics is expected to under-perform the Covalon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Knight Therapeutics is 1.43 times less risky than Covalon Technologies. The stock trades about -0.1 of its potential returns per unit of risk. The Covalon Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 336.00 in Covalon Technologies on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Covalon Technologies or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knight Therapeutics vs. Covalon Technologies
Performance |
| Timeline |
| Knight Therapeutics |
| Covalon Technologies |
Knight Therapeutics and Covalon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Therapeutics and Covalon Technologies
The main advantage of trading using opposite Knight Therapeutics and Covalon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Therapeutics position performs unexpectedly, Covalon Technologies 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 Covalon Technologies will offset losses from the drop in Covalon Technologies' long position.| Knight Therapeutics vs. Stella Jones | Knight Therapeutics vs. Richelieu Hardware | Knight Therapeutics vs. Element Fleet Management | Knight Therapeutics vs. ECN Capital Corp |
| Covalon Technologies vs. Resverlogix Corp | Covalon Technologies vs. iShares Canadian HYBrid | Covalon Technologies vs. Altagas Cum Red | Covalon Technologies vs. European Residential Real |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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