Correlation Between KNOT Offshore and 26885BAE0

Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and 26885BAE0 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 26885BAE0 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 EQM Midstream Partners, you can compare the effects of market volatilities on KNOT Offshore and 26885BAE0 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 26885BAE0. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and 26885BAE0.

Diversification Opportunities for KNOT Offshore and 26885BAE0

0.48

Correlation Coefficient

KNOT Offshore  26885BAE0

Very weak diversification

The 3 months correlation between KNOT and 26885BAE0 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and EQM Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQM Midstream Partners 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 26885BAE0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQM Midstream Partners has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and 26885BAE0 go up and down completely randomly.

Pair Corralation between KNOT Offshore and 26885BAE0

Given the investment horizon of 90 days KNOT Offshore is expected to generate 5.92 times less return on investment than 26885BAE0. In addition to that, KNOT Offshore is 1.32 times more volatile than EQM Midstream Partners. It trades about 0.04 of its total potential returns per unit of risk. EQM Midstream Partners is currently generating about 0.29 per unit of volatility. If you would invest  9,797  in EQM Midstream Partners on December 4, 2024 and sell it today you would earn a total of  476.00  from holding EQM Midstream Partners or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

KNOT Offshore Partners  vs.  EQM Midstream Partners

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.

EQM Midstream Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days EQM Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26885BAE0 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KNOT Offshore and 26885BAE0

The main advantage of trading using opposite KNOT Offshore and 26885BAE0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KNOT Offshore position performs unexpectedly, 26885BAE0 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 26885BAE0 will offset losses from the drop in 26885BAE0's long position.

The idea behind KNOT Offshore Partners and EQM Midstream Partners 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.