Correlation Between Power Ledger and KNC

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

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

Diversification Opportunities for Power Ledger and KNC

0.68

Correlation Coefficient

Power Ledger  KNC

Poor diversification

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

Pair Corralation between Power Ledger and KNC

Assuming the 90 days trading horizon Power Ledger is expected to generate 1.03 times more return on investment than KNC. However, Power Ledger is 1.03 times more volatile than KNC. It trades about 0.08 of its potential returns per unit of risk. KNC is currently generating about 0.02 per unit of risk. If you would invest  17.00  in Power Ledger on August 4, 2024 and sell it today you would earn a total of  3.00  from holding Power Ledger or generate 17.65% return on investment over 90 days.

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

Power Ledger  vs.  KNC

Power Ledger

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power Ledger are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Power Ledger exhibited solid returns over the last few months and may actually be approaching a breakup point.

KNC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KNC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KNC may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Power Ledger and KNC

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

The idea behind Power Ledger and KNC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.