Correlation Between KNOT Offshore and Boston Properties

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

Diversification Opportunities for KNOT Offshore and Boston Properties

-0.14

Correlation Coefficient

KNOT Offshore  Boston Properties

Good diversification

The 3 months correlation between KNOT and Boston is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Boston Properties go up and down completely randomly.

Pair Corralation between KNOT Offshore and Boston Properties

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Boston Properties. In addition to that, KNOT Offshore is 1.05 times more volatile than Boston Properties. It trades about -0.15 of its total potential returns per unit of risk. Boston Properties is currently generating about 0.02 per unit of volatility. If you would invest  7,909  in Boston Properties on September 13, 2024 and sell it today you would earn a total of  90.00  from holding Boston Properties or generate 1.14% 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 Properties

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 unsteady 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.

Boston Properties

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KNOT Offshore and Boston Properties

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

The idea behind KNOT Offshore Partners and Boston Properties 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.