Correlation Between KNOT Offshore and AerSale Corp

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

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

Diversification Opportunities for KNOT Offshore and AerSale Corp

0.25

Correlation Coefficient

KNOT Offshore  AerSale Corp

Modest diversification

The 3 months correlation between KNOT and AerSale is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp and KNOT Offshore 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 KNOT Offshore Partners are associated (or correlated) with AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and AerSale Corp go up and down completely randomly.

Pair Corralation between KNOT Offshore and AerSale Corp

Given the investment horizon of 90 days KNOT Offshore is expected to generate 1.32 times less return on investment than AerSale Corp. In addition to that, KNOT Offshore is 1.05 times more volatile than AerSale Corp. It trades about 0.15 of its total potential returns per unit of risk. AerSale Corp is currently generating about 0.21 per unit of volatility. If you would invest  615.00  in AerSale Corp on December 28, 2024 and sell it today you would earn a total of  225.00  from holding AerSale Corp or generate 36.59% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  AerSale Corp

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 conflicting basic indicators, KNOT Offshore reported solid returns over the last few months and may actually be approaching a breakup point.

AerSale Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and AerSale Corp

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

The idea behind KNOT Offshore Partners and AerSale Corp 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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.