Correlation Between Boston Omaha and KNOT Offshore

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

By analyzing existing cross correlation between Boston Omaha Corp and KNOT Offshore Partners, you can compare the effects of market volatilities on Boston Omaha and KNOT Offshore 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 Boston Omaha with a short position of KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Omaha and KNOT Offshore.

Diversification Opportunities for Boston Omaha and KNOT Offshore

0.08

Correlation Coefficient

Boston Omaha  KNOT Offshore

Significant diversification

The 3 months correlation between Boston and KNOT is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Boston Omaha Corp and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners and Boston Omaha 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 Boston Omaha Corp are associated (or correlated) with KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Boston Omaha i.e., Boston Omaha and KNOT Offshore go up and down completely randomly.

Pair Corralation between Boston Omaha and KNOT Offshore

Considering the 90-day investment horizon Boston Omaha Corp is expected to under-perform the KNOT Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Boston Omaha Corp is 1.57 times less risky than KNOT Offshore. The stock trades about -0.34 of its potential returns per unit of risk. The KNOT Offshore Partners is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  578.00  in KNOT Offshore Partners on October 13, 2024 and sell it today you would earn a total of  31.00  from holding KNOT Offshore Partners or generate 5.36% return on investment over 90 days.

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

Boston Omaha Corp  vs.  KNOT Offshore Partners

Boston Omaha Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Omaha Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

KNOT Offshore Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNOT Offshore Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Boston Omaha and KNOT Offshore

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

The idea behind Boston Omaha Corp and KNOT Offshore Partners 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.