Correlation Between KNOT Offshore and United Maritime

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

Diversification Opportunities for KNOT Offshore and United Maritime

-0.58

Correlation Coefficient

KNOT Offshore  United Maritime

Excellent diversification

The 3 months correlation between KNOT and United is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and United Maritime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Maritime 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 Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Maritime has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and United Maritime go up and down completely randomly.

Pair Corralation between KNOT Offshore and United Maritime

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.91 times more return on investment than United Maritime. However, KNOT Offshore Partners is 1.1 times less risky than United Maritime. It trades about 0.15 of its potential returns per unit of risk. United Maritime is currently generating about -0.03 per unit of risk. If you would invest  535.00  in KNOT Offshore Partners on December 27, 2024 and sell it today you would earn a total of  139.00  from holding KNOT Offshore Partners or generate 25.98% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  United Maritime

KNOT Offshore Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, KNOT Offshore reported solid returns over the last few months and may actually be approaching a breakup point.

United Maritime

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Maritime has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KNOT Offshore and United Maritime

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

The idea behind KNOT Offshore Partners and United Maritime 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.