Correlation Between Knowles Cor and DZS

Can any of the company-specific risk be diversified away by investing in both Knowles Cor and DZS 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 DZS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Knowles Cor and DZS Inc, you can compare the effects of market volatilities on Knowles Cor and DZS 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 DZS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knowles Cor and DZS.

Diversification Opportunities for Knowles Cor and DZS

0.74

Correlation Coefficient

Knowles Cor  DZS

Poor diversification

The 3 months correlation between Knowles and DZS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and DZS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DZS Inc 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 DZS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DZS Inc has no effect on the direction of Knowles Cor i.e., Knowles Cor and DZS go up and down completely randomly.

Pair Corralation between Knowles Cor and DZS

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.41 times more return on investment than DZS. However, Knowles Cor is 2.42 times less risky than DZS. It trades about 0.13 of its potential returns per unit of risk. DZS Inc is currently generating about -0.21 per unit of risk. If you would invest  1,534  in Knowles Cor on January 25, 2024 and sell it today you would earn a total of  70.00  from holding Knowles Cor or generate 4.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Knowles Cor  vs.  DZS Inc

Knowles Cor

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

DZS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DZS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Knowles Cor and DZS

The main advantage of trading using opposite Knowles Cor and DZS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, DZS 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 DZS will offset losses from the drop in DZS's long position.

The idea behind Knowles Cor and DZS 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.