Correlation Between Westport Fuel and Knight Therapeutics

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

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

Diversification Opportunities for Westport Fuel and Knight Therapeutics

0.56

Correlation Coefficient

Westport Fuel  Knight Therapeutics

Very weak diversification

The 3 months correlation between Westport and Knight is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Westport Fuel 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 Westport Fuel Systems are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of Westport Fuel i.e., Westport Fuel and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Westport Fuel and Knight Therapeutics

Assuming the 90 days trading horizon Westport Fuel Systems is expected to generate 2.07 times more return on investment than Knight Therapeutics. However, Westport Fuel is 2.07 times more volatile than Knight Therapeutics. It trades about 0.16 of its potential returns per unit of risk. Knight Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  391.00  in Westport Fuel Systems on May 5, 2025 and sell it today you would earn a total of  116.00  from holding Westport Fuel Systems or generate 29.67% return on investment over 90 days.

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

Westport Fuel Systems  vs.  Knight Therapeutics

Westport Fuel Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westport Fuel Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Westport Fuel displayed solid returns over the last few months and may actually be approaching a breakup point.

Knight Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Knight Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Westport Fuel and Knight Therapeutics

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

The idea behind Westport Fuel Systems and Knight Therapeutics 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.