Correlation Between KNOT Offshore and Bank of New York

Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and Bank of New York 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 Bank of New York 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 Bank of New, you can compare the effects of market volatilities on KNOT Offshore and Bank of New York 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 Bank of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and Bank of New York.

Diversification Opportunities for KNOT Offshore and Bank of New York

-0.89

Correlation Coefficient

KNOT Offshore  Bank of New York

Pay attention - limited upside

The 3 months correlation between KNOT and Bank is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Bank of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York 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 Bank of New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Bank of New York go up and down completely randomly.

Pair Corralation between KNOT Offshore and Bank of New York

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Bank of New York. In addition to that, KNOT Offshore is 1.58 times more volatile than Bank of New. It trades about -0.16 of its total potential returns per unit of risk. Bank of New is currently generating about 0.21 per unit of volatility. If you would invest  7,010  in Bank of New on September 14, 2024 and sell it today you would earn a total of  947.00  from holding Bank of New or generate 13.51% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Bank of New

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 abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Bank of New York

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Bank of New York disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and Bank of New York

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

The idea behind KNOT Offshore Partners and Bank of New 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.