Correlation Between Knight Therapeutics and Dollarama
Can any of the company-specific risk be diversified away by investing in both Knight Therapeutics and Dollarama 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 Dollarama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Therapeutics and Dollarama, you can compare the effects of market volatilities on Knight Therapeutics and Dollarama 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 Dollarama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Dollarama.
Diversification Opportunities for Knight Therapeutics and Dollarama
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Knight and Dollarama is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Dollarama go up and down completely randomly.
Pair Corralation between Knight Therapeutics and Dollarama
Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 10.61 times less return on investment than Dollarama. In addition to that, Knight Therapeutics is 1.18 times more volatile than Dollarama. It trades about 0.01 of its total potential returns per unit of risk. Dollarama is currently generating about 0.1 per unit of volatility. If you would invest 8,120 in Dollarama on August 24, 2024 and sell it today you would earn a total of 6,431 from holding Dollarama or generate 79.2% 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. Dollarama
Performance |
| Timeline |
| Knight Therapeutics |
| Dollarama |
Knight Therapeutics and Dollarama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Therapeutics and Dollarama
The main advantage of trading using opposite Knight Therapeutics and Dollarama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Therapeutics position performs unexpectedly, Dollarama 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 Dollarama will offset losses from the drop in Dollarama's long position.| Knight Therapeutics vs. Stella Jones | Knight Therapeutics vs. Richelieu Hardware | Knight Therapeutics vs. Element Fleet Management | Knight Therapeutics vs. ECN Capital Corp |
| Dollarama vs. Canadian Tire | Dollarama vs. Loblaw Companies Limited | Dollarama vs. Metro Inc | Dollarama vs. Canadian National Railway |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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