Correlation Between Knife River and Schwab Broad
Can any of the company-specific risk be diversified away by investing in both Knife River and Schwab Broad 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 Schwab Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and Schwab Broad Market, you can compare the effects of market volatilities on Knife River and Schwab Broad 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 Schwab Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Schwab Broad.
Diversification Opportunities for Knife River and Schwab Broad
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Knife and Schwab is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Schwab Broad Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Broad Market 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 Schwab Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Broad Market has no effect on the direction of Knife River i.e., Knife River and Schwab Broad go up and down completely randomly.
Pair Corralation between Knife River and Schwab Broad
Considering the 90-day investment horizon Knife River is expected to generate 2.81 times more return on investment than Schwab Broad. However, Knife River is 2.81 times more volatile than Schwab Broad Market. It trades about 0.14 of its potential returns per unit of risk. Schwab Broad Market is currently generating about 0.13 per unit of risk. If you would invest 3,551 in Knife River on August 28, 2024 and sell it today you would earn a total of 6,855 from holding Knife River or generate 193.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 79.41% |
| Values | Daily Returns |
Knife River vs. Schwab Broad Market
Performance |
| Timeline |
| Knife River |
| Schwab Broad Market |
Knife River and Schwab Broad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and Schwab Broad
The main advantage of trading using opposite Knife River and Schwab Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, Schwab Broad 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 Schwab Broad will offset losses from the drop in Schwab Broad'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 |
| Schwab Broad vs. Schwab International Equity | Schwab Broad vs. Schwab Large Cap ETF | Schwab Broad vs. Schwab Small Cap ETF | Schwab Broad vs. Schwab Large Cap Growth |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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