Correlation Between Solar Alliance and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both Solar Alliance and Knight Therapeutics 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 Solar Alliance and Knight Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Alliance Energy and Knight Therapeutics, you can compare the effects of market volatilities on Solar Alliance and Knight Therapeutics 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 Solar Alliance with a short position of Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and Knight Therapeutics.
Diversification Opportunities for Solar Alliance and Knight Therapeutics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Solar and Knight is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of Solar Alliance i.e., Solar Alliance and Knight Therapeutics go up and down completely randomly.
Pair Corralation between Solar Alliance and Knight Therapeutics
Assuming the 90 days trading horizon Solar Alliance Energy is not expected to generate positive returns. Moreover, Solar Alliance is 4.15 times more volatile than Knight Therapeutics. It trades away all of its potential returns to assume current level of volatility. Knight Therapeutics is currently generating about -0.1 per unit of risk. If you would invest 4.00 in Solar Alliance Energy on September 2, 2024 and sell it today you would lose (0.50) from holding Solar Alliance Energy or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Alliance Energy vs. Knight Therapeutics
Performance |
| Timeline |
| Solar Alliance Energy |
| Knight Therapeutics |
Solar Alliance and Knight Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Alliance and Knight Therapeutics
The main advantage of trading using opposite Solar Alliance and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Alliance position performs unexpectedly, Knight Therapeutics 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 Knight Therapeutics will offset losses from the drop in Knight Therapeutics' long position.| Solar Alliance vs. Royal Bank of | Solar Alliance vs. Toronto Dominion Bank Pref | Solar Alliance vs. Toronto Dominion Bank | Solar Alliance vs. Amazon CDR |
| Knight Therapeutics vs. Stella Jones | Knight Therapeutics vs. Richelieu Hardware | Knight Therapeutics vs. Element Fleet Management | Knight Therapeutics vs. ECN Capital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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