Correlation Between KNOT Offshore and Franklin Street

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

Diversification Opportunities for KNOT Offshore and Franklin Street

-0.23

Correlation Coefficient

KNOT Offshore  Franklin Street

Very good diversification

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

Pair Corralation between KNOT Offshore and Franklin Street

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 1.27 times more return on investment than Franklin Street. However, KNOT Offshore is 1.27 times more volatile than Franklin Street Properties. It trades about 0.16 of its potential returns per unit of risk. Franklin Street Properties is currently generating about 0.01 per unit of risk. If you would invest  535.00  in KNOT Offshore Partners on December 27, 2024 and sell it today you would earn a total of  143.00  from holding KNOT Offshore Partners or generate 26.73% 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.  Franklin Street Properties

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

Franklin Street Prop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Franklin Street Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franklin Street 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 Franklin Street

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

The idea behind KNOT Offshore Partners and Franklin Street 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.