Correlation Between Knife River and Pacific Ridge
Can any of the company-specific risk be diversified away by investing in both Knife River and Pacific Ridge 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 Pacific Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and Pacific Ridge Exploration, you can compare the effects of market volatilities on Knife River and Pacific Ridge 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 Pacific Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Pacific Ridge.
Diversification Opportunities for Knife River and Pacific Ridge
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Knife and Pacific is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Pacific Ridge Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Ridge Exploration 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 Pacific Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Ridge Exploration has no effect on the direction of Knife River i.e., Knife River and Pacific Ridge go up and down completely randomly.
Pair Corralation between Knife River and Pacific Ridge
Considering the 90-day investment horizon Knife River is expected to generate 6.36 times less return on investment than Pacific Ridge. But when comparing it to its historical volatility, Knife River is 8.6 times less risky than Pacific Ridge. It trades about 0.15 of its potential returns per unit of risk. Pacific Ridge Exploration is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Pacific Ridge Exploration on August 26, 2024 and sell it today you would earn a total of 0.00 from holding Pacific Ridge Exploration or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knife River vs. Pacific Ridge Exploration
Performance |
| Timeline |
| Knife River |
| Pacific Ridge Exploration |
Knife River and Pacific Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and Pacific Ridge
The main advantage of trading using opposite Knife River and Pacific Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, Pacific Ridge 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 Pacific Ridge will offset losses from the drop in Pacific Ridge's long position.| Knife River vs. Cemex SAB de | Knife River vs. Boise Cascad Llc | Knife River vs. CRH PLC ADR | Knife River vs. Eagle Materials |
| Pacific Ridge vs. Alien Metals | Pacific Ridge vs. Cartier Iron Corp | Pacific Ridge vs. Arctic Star Exploration | Pacific Ridge vs. Denarius Silver Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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