Correlation Between Black Knight and Box

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Can any of the company-specific risk be diversified away by investing in both Black Knight and Box 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 Black Knight and Box into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Knight and Box Inc, you can compare the effects of market volatilities on Black Knight and Box 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 Black Knight with a short position of Box. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Knight and Box.

Diversification Opportunities for Black Knight and Box

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Black and Box is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Black Knight and Box Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Box Inc and Black Knight 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 Black Knight are associated (or correlated) with Box. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Box Inc has no effect on the direction of Black Knight i.e., Black Knight and Box go up and down completely randomly.

Pair Corralation between Black Knight and Box

Considering the 90-day investment horizon Black Knight is expected to generate 0.86 times more return on investment than Box. However, Black Knight is 1.16 times less risky than Box. It trades about 0.04 of its potential returns per unit of risk. Box Inc is currently generating about 0.03 per unit of risk. If you would invest  6,552  in Black Knight on December 19, 2023 and sell it today you would earn a total of  1,024  from holding Black Knight or generate 15.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy63.88%
ValuesDaily Returns

Black Knight  vs.  Box Inc

 Performance 
       Timeline  
Black Knight 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Box Inc 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Box Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Box showed solid returns over the last few months and may actually be approaching a breakup point.

Black Knight and Box Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Black Knight and Box

The main advantage of trading using opposite Black Knight and Box positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Knight position performs unexpectedly, Box 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 Box will offset losses from the drop in Box's long position.
The idea behind Black Knight and Box Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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