Correlation Between Black Knight and Home Products

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

Diversification Opportunities for Black Knight and Home Products

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Black and HPCRF is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Black Knight and Home Products Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Products Center and Black Knight 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 Black Knight are associated (or correlated) with Home Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Products Center has no effect on the direction of Black Knight i.e., Black Knight and Home Products go up and down completely randomly.

Pair Corralation between Black Knight and Home Products

Considering the 90-day investment horizon Black Knight is expected to under-perform the Home Products. But the stock apears to be less risky and, when comparing its historical volatility, Black Knight is 5.94 times less risky than Home Products. The stock trades about -0.03 of its potential returns per unit of risk. The Home Products Center is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Home Products Center on August 28, 2022 and sell it today you would earn a total of  13.00  from holding Home Products Center or generate 72.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Black Knight  vs.  Home Products Center

 Performance (%) 
       Timeline  
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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Black Price Channel

Home Products Center 
HPCRF Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Home Products Center are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Home Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

HPCRF Price Channel

Black Knight and Home Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Black Knight and Home Products

The main advantage of trading using opposite Black Knight and Home Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Knight position performs unexpectedly, Home Products 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 Home Products will offset losses from the drop in Home Products' long position.
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The idea behind Black Knight and Home Products Center 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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