Correlation Between Knowles Cor and Ubiquiti Networks

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

Diversification Opportunities for Knowles Cor and Ubiquiti Networks

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Knowles and Ubiquiti is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Cor and Ubiquiti Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquiti Networks 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 Ubiquiti Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquiti Networks has no effect on the direction of Knowles Cor i.e., Knowles Cor and Ubiquiti Networks go up and down completely randomly.

Pair Corralation between Knowles Cor and Ubiquiti Networks

Allowing for the 90-day total investment horizon Knowles Cor is expected to generate 0.6 times more return on investment than Ubiquiti Networks. However, Knowles Cor is 1.67 times less risky than Ubiquiti Networks. It trades about -0.05 of its potential returns per unit of risk. Ubiquiti Networks is currently generating about -0.11 per unit of risk. If you would invest  1,671  in Knowles Cor on December 1, 2023 and sell it today you would lose (45.00) from holding Knowles Cor or give up 2.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Knowles Cor  vs.  Ubiquiti Networks

 Performance 
       Timeline  
Knowles Cor 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Knowles Cor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Knowles Cor is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Ubiquiti Networks 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ubiquiti Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Ubiquiti Networks is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Knowles Cor and Ubiquiti Networks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Knowles Cor and Ubiquiti Networks

The main advantage of trading using opposite Knowles Cor and Ubiquiti Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Cor position performs unexpectedly, Ubiquiti Networks 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 Ubiquiti Networks will offset losses from the drop in Ubiquiti Networks' long position.
The idea behind Knowles Cor and Ubiquiti Networks 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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