Correlation Between Strategy Shares and Knowledge Leaders

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

By analyzing existing cross correlation between Strategy Shares and Knowledge Leaders Developed, you can compare the effects of market volatilities on Strategy Shares and Knowledge Leaders 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 Strategy Shares with a short position of Knowledge Leaders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategy Shares and Knowledge Leaders.

Diversification Opportunities for Strategy Shares and Knowledge Leaders

0.9

Correlation Coefficient

Strategy Shares  Knowledge Leaders

Almost no diversification

The 3 months correlation between Strategy and Knowledge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares and Knowledge Leaders Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowledge Leaders and Strategy Shares 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 Strategy Shares are associated (or correlated) with Knowledge Leaders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowledge Leaders has no effect on the direction of Strategy Shares i.e., Strategy Shares and Knowledge Leaders go up and down completely randomly.

Pair Corralation between Strategy Shares and Knowledge Leaders

Given the investment horizon of 90 days Strategy Shares is expected to generate 1.56 times less return on investment than Knowledge Leaders. But when comparing it to its historical volatility, Strategy Shares is 2.52 times less risky than Knowledge Leaders. It trades about 0.24 of its potential returns per unit of risk. Knowledge Leaders Developed is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,769  in Knowledge Leaders Developed on May 17, 2025 and sell it today you would earn a total of  223.00  from holding Knowledge Leaders Developed or generate 4.68% return on investment over 90 days.

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

Strategy Shares  vs.  Knowledge Leaders Developed

Strategy Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategy Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Knowledge Leaders

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knowledge Leaders Developed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Knowledge Leaders is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Strategy Shares and Knowledge Leaders

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

The idea behind Strategy Shares and Knowledge Leaders Developed 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.