Correlation Between Knowles Cor and Ability

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

Diversification Opportunities for Knowles Cor and Ability

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between Knowles and Ability is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Ability in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ability and Knowles Cor 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 Knowles Cor are associated (or correlated) with Ability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ability has no effect on the direction of Knowles Cor i.e., Knowles Cor and Ability go up and down completely randomly.

Pair Corralation between Knowles Cor and Ability

Allowing for the 90-day total investment horizon Knowles Cor is expected to under-perform the Ability. But the stock apears to be less risky and, when comparing its historical volatility, Knowles Cor is 8.19 times less risky than Ability. The stock trades about -0.01 of its potential returns per unit of risk. The Ability is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Ability on December 29, 2023 and sell it today you would lose (19.98) from holding Ability or give up 99.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy42.51%
ValuesDaily Returns

Knowles Cor  vs.  Ability

 Performance 
       Timeline  
Knowles Cor 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Ability 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Ability has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Ability is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Knowles Cor and Ability Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Knowles Cor and Ability

The main advantage of trading using opposite Knowles Cor and Ability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, Ability 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 Ability will offset losses from the drop in Ability's long position.
The idea behind Knowles Cor and Ability 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.
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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