Correlation Between Kontoor Brands and KNOT Offshore

Can any of the company-specific risk be diversified away by investing in both Kontoor Brands and KNOT Offshore 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 Kontoor Brands and KNOT Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kontoor Brands and KNOT Offshore Partners, you can compare the effects of market volatilities on Kontoor Brands and KNOT Offshore 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 Kontoor Brands with a short position of KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontoor Brands and KNOT Offshore.

Diversification Opportunities for Kontoor Brands and KNOT Offshore

0.18

Correlation Coefficient

Kontoor Brands  KNOT Offshore

Average diversification

The 3 months correlation between Kontoor and KNOT is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kontoor Brands and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners and Kontoor Brands 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 Kontoor Brands are associated (or correlated) with KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Kontoor Brands i.e., Kontoor Brands and KNOT Offshore go up and down completely randomly.

Pair Corralation between Kontoor Brands and KNOT Offshore

Considering the 90-day investment horizon Kontoor Brands is expected to generate 0.85 times more return on investment than KNOT Offshore. However, Kontoor Brands is 1.18 times less risky than KNOT Offshore. It trades about 0.04 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.01 per unit of risk. If you would invest  4,733  in Kontoor Brands on December 4, 2024 and sell it today you would earn a total of  1,519  from holding Kontoor Brands or generate 32.09% return on investment over 90 days.

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

Kontoor Brands  vs.  KNOT Offshore Partners

Kontoor Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kontoor Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Kontoor Brands and KNOT Offshore

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

The idea behind Kontoor Brands and KNOT Offshore 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.