Correlation Between KNOT Offshore and Castor Maritime

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

Diversification Opportunities for KNOT Offshore and Castor Maritime

0.89

Correlation Coefficient

KNOT Offshore  Castor Maritime

Very poor diversification

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

Pair Corralation between KNOT Offshore and Castor Maritime

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.43 times more return on investment than Castor Maritime. However, KNOT Offshore Partners is 2.33 times less risky than Castor Maritime. It trades about -0.26 of its potential returns per unit of risk. Castor Maritime is currently generating about -0.29 per unit of risk. If you would invest  583.00  in KNOT Offshore Partners on September 30, 2024 and sell it today you would lose (46.00) from holding KNOT Offshore Partners or give up 7.89% of portfolio value over 90 days.

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

KNOT Offshore Partners  vs.  Castor Maritime

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.

Castor Maritime

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castor Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with KNOT Offshore and Castor Maritime

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

The idea behind KNOT Offshore Partners and Castor Maritime 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.