Correlation Between KNOT Offshore and Boston Omaha

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

Diversification Opportunities for KNOT Offshore and Boston Omaha

-0.23

Correlation Coefficient

KNOT Offshore  Boston Omaha

Very good diversification

The 3 months correlation between KNOT and Boston is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Boston Omaha Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Omaha 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 Boston Omaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Omaha Corp has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Boston Omaha go up and down completely randomly.

Pair Corralation between KNOT Offshore and Boston Omaha

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 1.71 times more return on investment than Boston Omaha. However, KNOT Offshore is 1.71 times more volatile than Boston Omaha Corp. It trades about 0.09 of its potential returns per unit of risk. Boston Omaha Corp is currently generating about -0.02 per unit of risk. If you would invest  541.00  in KNOT Offshore Partners on December 24, 2024 and sell it today you would earn a total of  70.00  from holding KNOT Offshore Partners or generate 12.94% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Boston Omaha Corp

KNOT Offshore Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 7 (%) 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.

Boston Omaha Corp

Risk-Adjusted Performance

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 rather sound basic indicators, Boston Omaha is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KNOT Offshore and Boston Omaha

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

The idea behind KNOT Offshore Partners and Boston Omaha 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.