Correlation Between Walmart and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Knight Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart Inc CDR and Knight Therapeutics, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Knight Therapeutics.
Diversification Opportunities for Walmart and Knight Therapeutics
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Knight is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Walmart 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 Walmart Inc CDR 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 Walmart i.e., Walmart and Knight Therapeutics go up and down completely randomly.
Pair Corralation between Walmart and Knight Therapeutics
Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the Knight Therapeutics. In addition to that, Walmart is 1.36 times more volatile than Knight Therapeutics. It trades about -0.1 of its total potential returns per unit of risk. Knight Therapeutics is currently generating about -0.04 per unit of volatility. If you would invest 570.00 in Knight Therapeutics on November 27, 2024 and sell it today you would lose (7.00) from holding Knight Therapeutics or give up 1.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart Inc CDR vs. Knight Therapeutics
Performance |
| Timeline |
| Walmart Inc CDR |
| Knight Therapeutics |
Walmart and Knight Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Knight Therapeutics
The main advantage of trading using opposite Walmart and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. CVS HEALTH CDR | Walmart vs. East Side Games | Walmart vs. Bausch Health Companies | Walmart vs. TUT Fitness Group |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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