Correlation Between Knights Of and Jennison Natural

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Can any of the company-specific risk be diversified away by investing in both Knights Of and Jennison Natural 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 Knights Of and Jennison Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knights Of Umbus and Jennison Natural Resources, you can compare the effects of market volatilities on Knights Of and Jennison Natural 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 Knights Of with a short position of Jennison Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knights Of and Jennison Natural.

Diversification Opportunities for Knights Of and Jennison Natural

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Knights and Jennison is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Knights Of Umbus and Jennison Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jennison Natural Res and Knights Of 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 Knights Of Umbus are associated (or correlated) with Jennison Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jennison Natural Res has no effect on the direction of Knights Of i.e., Knights Of and Jennison Natural go up and down completely randomly.

Pair Corralation between Knights Of and Jennison Natural

Assuming the 90 days horizon Knights Of Umbus is expected to generate 0.58 times more return on investment than Jennison Natural. However, Knights Of Umbus is 1.72 times less risky than Jennison Natural. It trades about 0.09 of its potential returns per unit of risk. Jennison Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  1,439  in Knights Of Umbus on September 3, 2024 and sell it today you would earn a total of  526.00  from holding Knights Of Umbus or generate 36.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Knights Of Umbus  vs.  Jennison Natural Resources

 Performance 
       Timeline  
Knights Of Umbus 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Knights Of Umbus are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Knights Of may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Jennison Natural Res 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Jennison Natural Resources are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jennison Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Knights Of and Jennison Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Knights Of and Jennison Natural

The main advantage of trading using opposite Knights Of and Jennison Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knights Of position performs unexpectedly, Jennison Natural 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 Jennison Natural will offset losses from the drop in Jennison Natural's long position.
The idea behind Knights Of Umbus and Jennison Natural Resources 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.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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