Correlation Between Alfi and Black Knight

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Can any of the company-specific risk be diversified away by investing in both Alfi and Black Knight 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 Alfi and Black Knight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfi Inc and Black Knight, you can compare the effects of market volatilities on Alfi and Black Knight 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 Alfi with a short position of Black Knight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfi and Black Knight.

Diversification Opportunities for Alfi and Black Knight

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Alfi and Black is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alfi Inc and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight and Alfi 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 Alfi Inc are associated (or correlated) with Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Alfi i.e., Alfi and Black Knight go up and down completely randomly.

Pair Corralation between Alfi and Black Knight

Considering the 90-day investment horizon Alfi Inc is expected to generate 5.83 times more return on investment than Black Knight. However, Alfi is 5.83 times more volatile than Black Knight. It trades about 0.01 of its potential returns per unit of risk. Black Knight is currently generating about -0.03 per unit of risk. If you would invest  290.00  in Alfi Inc on July 3, 2022 and sell it today you would lose (192.00)  from holding Alfi Inc or give up 66.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy71.89%
ValuesDaily Returns

Alfi Inc  vs.  Black Knight

 Performance (%) 
       Timeline  
Alfi Inc 
Alfi Performance
0 of 100
Over the last 90 days Alfi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfi Price Channel

Black Knight 
Black Performance
0 of 100
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Black Knight is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Black Price Channel

Alfi and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alfi and Black Knight

The main advantage of trading using opposite Alfi and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfi position performs unexpectedly, Black Knight 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 Black Knight will offset losses from the drop in Black Knight's long position.
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The idea behind Alfi Inc and Black Knight 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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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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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