Correlation Between Stepstone and KNOT Offshore

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

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

Diversification Opportunities for Stepstone and KNOT Offshore

-0.12

Correlation Coefficient

Stepstone  KNOT Offshore

Good diversification

The 3 months correlation between Stepstone and KNOT is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group 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 Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and KNOT Offshore go up and down completely randomly.

Pair Corralation between Stepstone and KNOT Offshore

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the KNOT Offshore. In addition to that, Stepstone is 1.04 times more volatile than KNOT Offshore Partners. It trades about -0.02 of its total potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.15 per unit of volatility. 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	100.0%
Values	Daily Returns

Stepstone Group  vs.  KNOT Offshore Partners

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 Stepstone and KNOT Offshore

The main advantage of trading using opposite Stepstone and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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 Stepstone Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.