Correlation Between KNOT Offshore and SEI Investments

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

Diversification Opportunities for KNOT Offshore and SEI Investments

-0.14

Correlation Coefficient

KNOT Offshore  SEI Investments

Good diversification

The 3 months correlation between KNOT and SEI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and SEI Investments go up and down completely randomly.

Pair Corralation between KNOT Offshore and SEI Investments

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 1.7 times more return on investment than SEI Investments. However, KNOT Offshore is 1.7 times more volatile than SEI Investments. It trades about 0.04 of its potential returns per unit of risk. SEI Investments is currently generating about -0.51 per unit of risk. If you would invest  549.00  in KNOT Offshore Partners on December 4, 2024 and sell it today you would earn a total of  6.00  from holding KNOT Offshore Partners or generate 1.09% 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.  SEI Investments

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.

SEI Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEI Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with KNOT Offshore and SEI Investments

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

The idea behind KNOT Offshore Partners and SEI Investments 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.