Correlation Between HP and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Knight Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Knight Therapeutics, you can compare the effects of market volatilities on HP 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 HP with a short position of Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Knight Therapeutics.
Diversification Opportunities for HP and Knight Therapeutics
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HP and Knight is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and HP 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 HP Inc 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 HP i.e., HP and Knight Therapeutics go up and down completely randomly.
Pair Corralation between HP and Knight Therapeutics
Considering the 90-day investment horizon HP Inc is expected to generate 0.99 times more return on investment than Knight Therapeutics. However, HP Inc is 1.01 times less risky than Knight Therapeutics. It trades about 0.11 of its potential returns per unit of risk. Knight Therapeutics is currently generating about -0.09 per unit of risk. If you would invest 3,517 in HP Inc on August 29, 2024 and sell it today you would earn a total of 393.00 from holding HP Inc or generate 11.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Knight Therapeutics
Performance |
| Timeline |
| HP Inc |
| Knight Therapeutics |
HP and Knight Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Knight Therapeutics
The main advantage of trading using opposite HP and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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.The idea behind HP Inc and Knight Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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