Correlation Between Shift4 Payments and Black Knight

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Can any of the company-specific risk be diversified away by investing in both Shift4 Payments 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 Shift4 Payments and Black Knight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shift4 Payments and Black Knight, you can compare the effects of market volatilities on Shift4 Payments 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 Shift4 Payments with a short position of Black Knight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shift4 Payments and Black Knight.

Diversification Opportunities for Shift4 Payments and Black Knight

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Shift4 and Black is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shift4 Payments and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight and Shift4 Payments 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 Shift4 Payments 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 Shift4 Payments i.e., Shift4 Payments and Black Knight go up and down completely randomly.

Pair Corralation between Shift4 Payments and Black Knight

Given the investment horizon of 90 days Shift4 Payments is expected to generate 2.2 times more return on investment than Black Knight. However, Shift4 Payments is 2.2 times more volatile than Black Knight. It trades about 0.02 of its potential returns per unit of risk. Black Knight is currently generating about -0.01 per unit of risk. If you would invest  4,954  in Shift4 Payments on May 9, 2022 and sell it today you would lose (469.00)  from holding Shift4 Payments or give up 9.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Shift4 Payments  vs.  Black Knight

 Performance (%) 
       Timeline  
Shift4 Payments 
Shift4 Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Shift4 Payments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Shift4 Payments reported solid returns over the last few months and may actually be approaching a breakup point.

Shift4 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 latest uncertain performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Black Price Channel

Shift4 Payments and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shift4 Payments and Black Knight

The main advantage of trading using opposite Shift4 Payments and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shift4 Payments 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.
The idea behind Shift4 Payments 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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