Correlation Between KNOT Offshore and Weibo Corp

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

Diversification Opportunities for KNOT Offshore and Weibo Corp

-0.21

Correlation Coefficient

KNOT Offshore  Weibo Corp

Very good diversification

The 3 months correlation between KNOT and Weibo is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Weibo Corp go up and down completely randomly.

Pair Corralation between KNOT Offshore and Weibo Corp

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Weibo Corp. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 2.67 times less risky than Weibo Corp. The stock trades about -0.19 of its potential returns per unit of risk. The Weibo Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  763.00  in Weibo Corp on September 20, 2024 and sell it today you would earn a total of  283.00  from holding Weibo Corp or generate 37.09% 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.  Weibo Corp

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.

Weibo Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and Weibo Corp

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

The idea behind KNOT Offshore Partners and Weibo Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.