Correlation Between KNOT Offshore and United Airlines

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

Diversification Opportunities for KNOT Offshore and United Airlines

0.28

Correlation Coefficient

KNOT Offshore  United Airlines

Modest diversification

The 3 months correlation between KNOT and United is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and United Airlines go up and down completely randomly.

Pair Corralation between KNOT Offshore and United Airlines

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.69 times more return on investment than United Airlines. However, KNOT Offshore Partners is 1.45 times less risky than United Airlines. It trades about 0.05 of its potential returns per unit of risk. United Airlines Holdings is currently generating about -0.15 per unit of risk. If you would invest  532.00  in KNOT Offshore Partners on December 19, 2024 and sell it today you would earn a total of  24.00  from holding KNOT Offshore Partners or generate 4.51% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  United Airlines Holdings

KNOT Offshore Partners

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

United Airlines Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with KNOT Offshore and United Airlines

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

The idea behind KNOT Offshore Partners and United Airlines Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.