Correlation Between Knight Therapeutics and Westport Fuel
Can any of the company-specific risk be diversified away by investing in both Knight Therapeutics and Westport Fuel 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 Westport Fuel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knight Therapeutics and Westport Fuel Systems, you can compare the effects of market volatilities on Knight Therapeutics and Westport Fuel 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 Westport Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Westport Fuel.
Diversification Opportunities for Knight Therapeutics and Westport Fuel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Knight and Westport is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Westport Fuel Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westport Fuel Systems 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 Westport Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westport Fuel Systems has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Westport Fuel go up and down completely randomly.
Pair Corralation between Knight Therapeutics and Westport Fuel
Assuming the 90 days trading horizon Knight Therapeutics is expected to under-perform the Westport Fuel. In addition to that, Knight Therapeutics is 1.42 times more volatile than Westport Fuel Systems. It trades about -0.08 of its total potential returns per unit of risk. Westport Fuel Systems is currently generating about 0.1 per unit of volatility. If you would invest 595.00 in Westport Fuel Systems on August 25, 2024 and sell it today you would earn a total of 25.00 from holding Westport Fuel Systems or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knight Therapeutics vs. Westport Fuel Systems
Performance |
| Timeline |
| Knight Therapeutics |
| Westport Fuel Systems |
Knight Therapeutics and Westport Fuel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knight Therapeutics and Westport Fuel
The main advantage of trading using opposite Knight Therapeutics and Westport Fuel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knight Therapeutics position performs unexpectedly, Westport Fuel 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 Westport Fuel will offset losses from the drop in Westport Fuel'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 |
| Westport Fuel vs. Martinrea International | Westport Fuel vs. Magna International | Westport Fuel vs. CCL Industries | Westport Fuel vs. Stella Jones |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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