Correlation Between Knife River and FlexShares Morningstar
Can any of the company-specific risk be diversified away by investing in both Knife River and FlexShares Morningstar 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 FlexShares Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and FlexShares Morningstar Market, you can compare the effects of market volatilities on Knife River and FlexShares Morningstar 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 FlexShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and FlexShares Morningstar.
Diversification Opportunities for Knife River and FlexShares Morningstar
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Knife and FlexShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and FlexShares Morningstar Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar 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 FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of Knife River i.e., Knife River and FlexShares Morningstar go up and down completely randomly.
Pair Corralation between Knife River and FlexShares Morningstar
Considering the 90-day investment horizon Knife River is expected to generate 3.26 times more return on investment than FlexShares Morningstar. However, Knife River is 3.26 times more volatile than FlexShares Morningstar Market. It trades about 0.1 of its potential returns per unit of risk. FlexShares Morningstar Market is currently generating about 0.22 per unit of risk. If you would invest 9,641 in Knife River on August 30, 2024 and sell it today you would earn a total of 634.00 from holding Knife River or generate 6.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knife River vs. FlexShares Morningstar Market
Performance |
| Timeline |
| Knife River |
| FlexShares Morningstar |
Knife River and FlexShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and FlexShares Morningstar
The main advantage of trading using opposite Knife River and FlexShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, FlexShares Morningstar 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 FlexShares Morningstar will offset losses from the drop in FlexShares Morningstar's long position.| Knife River vs. Philip Morris International | Knife River vs. PepsiCo | Knife River vs. Compania Cervecerias Unidas | Knife River vs. The Cheesecake Factory |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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