Correlation Between KNOT Offshore and LQR House

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

Diversification Opportunities for KNOT Offshore and LQR House

0.2

Correlation Coefficient

KNOT Offshore  LQR House

Modest diversification

The 3 months correlation between KNOT and LQR is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common 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 LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and LQR House go up and down completely randomly.

Pair Corralation between KNOT Offshore and LQR House

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.26 times more return on investment than LQR House. However, KNOT Offshore Partners is 3.86 times less risky than LQR House. It trades about 0.01 of its potential returns per unit of risk. LQR House Common is currently generating about -0.08 per unit of risk. If you would invest  595.00  in KNOT Offshore Partners on October 27, 2024 and sell it today you would lose (19.00) from holding KNOT Offshore Partners or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.05%
Values	Daily Returns

KNOT Offshore Partners  vs.  LQR House Common

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 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.

LQR House Common

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days LQR House Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and LQR House

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

The idea behind KNOT Offshore Partners and LQR House Common 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 CEOs Directory module to screen CEOs from public companies around the world.