Correlation Between Knowles Cor and Optical Cable
Can any of the company-specific risk be diversified away by investing in both Knowles Cor and Optical Cable 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 Knowles Cor and Optical Cable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knowles Cor and Optical Cable, you can compare the effects of market volatilities on Knowles Cor and Optical Cable 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 Knowles Cor with a short position of Optical Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and Optical Cable.
Diversification Opportunities for Knowles Cor and Optical Cable
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Knowles and Optical is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Optical Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optical Cable and Knowles Cor 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 Knowles Cor are associated (or correlated) with Optical Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optical Cable has no effect on the direction of Knowles Cor i.e., Knowles Cor and Optical Cable go up and down completely randomly.
Pair Corralation between Knowles Cor and Optical Cable
Allowing for the 90-day total investment horizon Knowles Cor is expected to under-perform the Optical Cable. But the stock apears to be less risky and, when comparing its historical volatility, Knowles Cor is 5.56 times less risky than Optical Cable. The stock trades about -0.17 of its potential returns per unit of risk. The Optical Cable is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 435.00 in Optical Cable on November 3, 2024 and sell it today you would earn a total of 58.00 from holding Optical Cable or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knowles Cor vs. Optical Cable
Performance |
| Timeline |
| Knowles Cor |
| Optical Cable |
Knowles Cor and Optical Cable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knowles Cor and Optical Cable
The main advantage of trading using opposite Knowles Cor and Optical Cable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, Optical Cable 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 Optical Cable will offset losses from the drop in Optical Cable's long position.| Knowles Cor vs. Mynaric AG ADR | Knowles Cor vs. Comtech Telecommunications Corp | Knowles Cor vs. Ituran Location and | Knowles Cor vs. Aviat Networks |
| Optical Cable vs. KVH Industries | Optical Cable vs. Knowles Cor | Optical Cable vs. Comtech Telecommunications Corp | Optical Cable vs. Lantronix |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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