Correlation Between KNOT Offshore and United Parks

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

Diversification Opportunities for KNOT Offshore and United Parks

-0.79

Correlation Coefficient

KNOT Offshore  United Parks

Pay attention - limited upside

The 3 months correlation between KNOT and United is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and United Parks go up and down completely randomly.

Pair Corralation between KNOT Offshore and United Parks

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 1.33 times less risky than United Parks. The stock trades about -0.21 of its potential returns per unit of risk. The United Parks Resorts is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,331  in United Parks Resorts on September 19, 2024 and sell it today you would earn a total of  435.00  from holding United Parks Resorts or generate 8.16% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  United Parks Resorts

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 unsteady 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.

United Parks Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KNOT Offshore and United Parks

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

The idea behind KNOT Offshore Partners and United Parks Resorts 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.