Correlation Between Knight Therapeutics and Constellation Software

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

By analyzing existing cross correlation between Knight Therapeutics and Constellation Software, you can compare the effects of market volatilities on Knight Therapeutics and Constellation Software 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 Knight Therapeutics with a short position of Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knight Therapeutics and Constellation Software.

Diversification Opportunities for Knight Therapeutics and Constellation Software

0.39

Correlation Coefficient

Knight Therapeutics  Constellation Software

Weak diversification

The 3 months correlation between Knight and Constellation is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Knight Therapeutics and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software and Knight Therapeutics 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 Knight Therapeutics are associated (or correlated) with Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Knight Therapeutics i.e., Knight Therapeutics and Constellation Software go up and down completely randomly.

Pair Corralation between Knight Therapeutics and Constellation Software

Assuming the 90 days trading horizon Knight Therapeutics is expected to generate 0.49 times more return on investment than Constellation Software. However, Knight Therapeutics is 2.02 times less risky than Constellation Software. It trades about -0.07 of its potential returns per unit of risk. Constellation Software is currently generating about -0.15 per unit of risk. If you would invest  609.00  in Knight Therapeutics on July 14, 2025 and sell it today you would lose (32.00) from holding Knight Therapeutics or give up 5.25% of portfolio value over 90 days.

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

Knight Therapeutics  vs.  Constellation Software

Knight Therapeutics

Risk-Adjusted Performance

Weakest

Over the last 90 days Knight Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Knight Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Constellation Software

Risk-Adjusted Performance

Weakest

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Knight Therapeutics and Constellation Software

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

The idea behind Knight Therapeutics and Constellation Software 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.