Correlation Between ECN Capital and Knight Therapeutics
Can any of the company-specific risk be diversified away by investing in both ECN Capital 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 ECN Capital and Knight Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECN Capital Corp and Knight Therapeutics, you can compare the effects of market volatilities on ECN Capital 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 ECN Capital with a short position of Knight Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECN Capital and Knight Therapeutics.
Diversification Opportunities for ECN Capital and Knight Therapeutics
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between ECN and Knight is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ECN Capital Corp and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and ECN Capital 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 ECN Capital Corp 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 ECN Capital i.e., ECN Capital and Knight Therapeutics go up and down completely randomly.
Pair Corralation between ECN Capital and Knight Therapeutics
Assuming the 90 days trading horizon ECN Capital is expected to generate 2.58 times less return on investment than Knight Therapeutics. But when comparing it to its historical volatility, ECN Capital Corp is 1.23 times less risky than Knight Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Knight Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 572.00 in Knight Therapeutics on July 1, 2024 and sell it today you would earn a total of 17.00 from holding Knight Therapeutics or generate 2.97% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ECN Capital Corp vs. Knight Therapeutics
Performance |
Timeline |
ECN Capital Corp |
Knight Therapeutics |
ECN Capital and Knight Therapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ECN Capital and Knight Therapeutics
The main advantage of trading using opposite ECN Capital and Knight Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECN Capital 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.ECN Capital vs. Timbercreek Financial Corp | ECN Capital vs. Bridgemarq Real Estate | ECN Capital vs. iShares Canadian HYBrid | ECN Capital vs. Altagas Cum Red |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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