Can any of the company-specific risk be diversified away by investing in both Knowles Cor and Akoustis Technologies 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 Akoustis Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knowles Cor and Akoustis Technologies, you can compare the effects of market volatilities on Knowles Cor and Akoustis Technologies 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 Akoustis Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and Akoustis Technologies.
Diversification Opportunities for Knowles Cor and Akoustis Technologies
The 3 months correlation between Knowles and Akoustis is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Akoustis Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akoustis Technologies 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 Akoustis Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akoustis Technologies has no effect on the direction of Knowles Cor i.e., Knowles Cor and Akoustis Technologies go up and down completely randomly.
Pair Corralation between Knowles Cor and Akoustis Technologies
Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.42 times more return on investment than Akoustis Technologies. However, Knowles Cor is 2.4 times less risky than Akoustis Technologies. It trades about 0.01 of its potential returns per unit of risk. Akoustis Technologies is currently generating about -0.1 per unit of risk. If you would invest 1,647 in Knowles Cor on September 7, 2023 and sell it today you would lose (43.00) from holding Knowles Cor or give up 2.61% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Knowles Cor may actually be approaching a critical reversion point that can send shares even higher in January 2024.
Over the last 90 days Akoustis Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Knowles Cor and Akoustis Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Knowles Cor and Akoustis Technologies
The main advantage of trading using opposite Knowles Cor and Akoustis Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, Akoustis Technologies 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 Akoustis Technologies will offset losses from the drop in Akoustis Technologies' long position.
The idea behind Knowles Cor and Akoustis Technologies 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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