Correlation Between KNOT Offshore and International Seaways

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

Diversification Opportunities for KNOT Offshore and International Seaways

0.01

Correlation Coefficient

KNOT Offshore  International Seaways

Significant diversification

The 3 months correlation between KNOT and International is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and International Seaways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Seaways 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 International Seaways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Seaways has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and International Seaways go up and down completely randomly.

Pair Corralation between KNOT Offshore and International Seaways

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.95 times more return on investment than International Seaways. However, KNOT Offshore Partners is 1.06 times less risky than International Seaways. It trades about 0.14 of its potential returns per unit of risk. International Seaways is currently generating about -0.01 per unit of risk. If you would invest  539.00  in KNOT Offshore Partners on December 30, 2024 and sell it today you would earn a total of  127.00  from holding KNOT Offshore Partners or generate 23.56% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  International Seaways

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 11 (%) 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.

International Seaways

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KNOT Offshore and International Seaways

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

The idea behind KNOT Offshore Partners and International Seaways 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.