Correlation Between Finnovate Acquisition and Knife River

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

By analyzing existing cross correlation between Finnovate Acquisition Corp and Knife River, you can compare the effects of market volatilities on Finnovate Acquisition and Knife River 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 Finnovate Acquisition with a short position of Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finnovate Acquisition and Knife River.

Diversification Opportunities for Finnovate Acquisition and Knife River

0.88

Correlation Coefficient

Finnovate Acquisition  Knife River

Very poor diversification

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

Pair Corralation between Finnovate Acquisition and Knife River

Given the investment horizon of 90 days Finnovate Acquisition is expected to generate 5.92 times less return on investment than Knife River. But when comparing it to its historical volatility, Finnovate Acquisition Corp is 10.97 times less risky than Knife River. It trades about 0.11 of its potential returns per unit of risk. Knife River is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,906  in Knife River on August 20, 2024 and sell it today you would earn a total of  1,519  from holding Knife River or generate 19.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.19%
Values	Daily Returns

Finnovate Acquisition Corp  vs.  Knife River

Finnovate Acquisition

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finnovate Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Finnovate Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Knife River

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finnovate Acquisition and Knife River

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

The idea behind Finnovate Acquisition Corp and Knife River 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.