Correlation Between Knife River and Bayview Acquisition

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

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

Diversification Opportunities for Knife River and Bayview Acquisition

0.68

Correlation Coefficient

Knife River  Bayview Acquisition

Poor diversification

The 3 months correlation between Knife and Bayview is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Bayview Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayview Acquisition Corp and Knife River 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 Knife River are associated (or correlated) with Bayview Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayview Acquisition Corp has no effect on the direction of Knife River i.e., Knife River and Bayview Acquisition go up and down completely randomly.

Pair Corralation between Knife River and Bayview Acquisition

Considering the 90-day investment horizon Knife River is expected to generate 1.78 times less return on investment than Bayview Acquisition. But when comparing it to its historical volatility, Knife River is 4.11 times less risky than Bayview Acquisition. It trades about 0.17 of its potential returns per unit of risk. Bayview Acquisition Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Bayview Acquisition Corp on August 21, 2024 and sell it today you would earn a total of  1.00  from holding Bayview Acquisition Corp or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	35.94%
Values	Daily Returns

Knife River  vs.  Bayview Acquisition Corp

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 unfluctuating basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Bayview Acquisition Corp

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Bayview Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unfluctuating basic indicators, Bayview Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Bayview Acquisition

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

The idea behind Knife River and Bayview Acquisition Corp 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 CEOs Directory module to screen CEOs from public companies around the world.