Correlation Between KNOT Offshore and GE Vernova

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

Diversification Opportunities for KNOT Offshore and GE Vernova

0.45

Correlation Coefficient

KNOT Offshore  GE Vernova

Very weak diversification

The 3 months correlation between KNOT and GEV is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and GE Vernova go up and down completely randomly.

Pair Corralation between KNOT Offshore and GE Vernova

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the GE Vernova. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 2.18 times less risky than GE Vernova. The stock trades about -0.01 of its potential returns per unit of risk. The GE Vernova LLC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  33,746  in GE Vernova LLC on December 16, 2024 and sell it today you would lose (2,383) from holding GE Vernova LLC or give up 7.06% of portfolio value over 90 days.

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

KNOT Offshore Partners  vs.  GE Vernova LLC

KNOT Offshore Partners

Risk-Adjusted Performance

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 relatively invariable basic indicators, KNOT Offshore is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

GE Vernova LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GE Vernova LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, GE Vernova is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with KNOT Offshore and GE Vernova

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

The idea behind KNOT Offshore Partners and GE Vernova LLC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.