Correlation Between Safe Bulkers and KNOT Offshore

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

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

Diversification Opportunities for Safe Bulkers and KNOT Offshore

-0.08

Correlation Coefficient

Safe Bulkers  KNOT Offshore

Good diversification

The 3 months correlation between Safe and KNOT is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers 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 Safe Bulkers i.e., Safe Bulkers and KNOT Offshore go up and down completely randomly.

Pair Corralation between Safe Bulkers and KNOT Offshore

Assuming the 90 days horizon Safe Bulkers is expected to generate 13.2 times less return on investment than KNOT Offshore. But when comparing it to its historical volatility, Safe Bulkers is 5.52 times less risky than KNOT Offshore. It trades about 0.06 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  539.00  in KNOT Offshore Partners on December 28, 2024 and sell it today you would earn a total of  139.00  from holding KNOT Offshore Partners or generate 25.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Safe Bulkers  vs.  KNOT Offshore Partners

Safe Bulkers

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Safe Bulkers are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Safe Bulkers is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 conflicting basic indicators, KNOT Offshore reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe Bulkers and KNOT Offshore

The main advantage of trading using opposite Safe Bulkers and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safe Bulkers 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 Safe Bulkers 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.