Correlation Between Knife River and James Hardie
Can any of the company-specific risk be diversified away by investing in both Knife River and James Hardie 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 Knife River and James Hardie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and James Hardie Industries, you can compare the effects of market volatilities on Knife River and James Hardie 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 Knife River with a short position of James Hardie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and James Hardie.
Diversification Opportunities for Knife River and James Hardie
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Knife and James is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and James Hardie Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Hardie Industries and Knife River 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 Knife River are associated (or correlated) with James Hardie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Hardie Industries has no effect on the direction of Knife River i.e., Knife River and James Hardie go up and down completely randomly.
Pair Corralation between Knife River and James Hardie
Considering the 90-day investment horizon Knife River is expected to generate 0.94 times more return on investment than James Hardie. However, Knife River is 1.07 times less risky than James Hardie. It trades about 0.13 of its potential returns per unit of risk. James Hardie Industries is currently generating about 0.06 per unit of risk. If you would invest 3,551 in Knife River on August 24, 2024 and sell it today you would earn a total of 6,501 from holding Knife River or generate 183.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.81% |
| Values | Daily Returns |
Knife River vs. James Hardie Industries
Performance |
| Timeline |
| Knife River |
| James Hardie Industries |
Knife River and James Hardie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and James Hardie
The main advantage of trading using opposite Knife River and James Hardie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, James Hardie 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 James Hardie will offset losses from the drop in James Hardie's long position.| Knife River vs. MGIC Investment Corp | Knife River vs. Western Asset Investment | Knife River vs. Guangdong Investment Limited | Knife River vs. Vera Bradley |
| James Hardie vs. Loma Negra Compania | James Hardie vs. Summit Materials | James Hardie vs. United States Lime | James Hardie vs. Eagle Materials |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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