Correlation Between Kirby and KNOT Offshore

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

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

Diversification Opportunities for Kirby and KNOT Offshore

0.12

Correlation Coefficient

Kirby  KNOT Offshore

Average diversification

The 3 months correlation between Kirby and KNOT is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kirby 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 Kirby 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 Kirby 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 Kirby i.e., Kirby and KNOT Offshore go up and down completely randomly.

Pair Corralation between Kirby and KNOT Offshore

Considering the 90-day investment horizon Kirby is expected to under-perform the KNOT Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Kirby is 1.6 times less risky than KNOT Offshore. The stock trades about -0.02 of its potential returns per unit of risk. The KNOT Offshore Partners is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  535.00  in KNOT Offshore Partners on December 27, 2024 and sell it today you would earn a total of  143.00  from holding KNOT Offshore Partners or generate 26.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Kirby  vs.  KNOT Offshore Partners

Kirby

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kirby has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Kirby is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KNOT Offshore Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, KNOT Offshore reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kirby and KNOT Offshore

The main advantage of trading using opposite Kirby and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirby 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 Kirby 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.