Correlation Between WT Offshore and KNOT Offshore

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

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

Diversification Opportunities for WT Offshore and KNOT Offshore

0.35

Correlation Coefficient

WT Offshore  KNOT Offshore

Weak diversification

The 3 months correlation between WTI and KNOT is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding WT Offshore 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 WT 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 WT Offshore 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 WT Offshore i.e., WT Offshore and KNOT Offshore go up and down completely randomly.

Pair Corralation between WT Offshore and KNOT Offshore

Considering the 90-day investment horizon WT Offshore is expected to generate 2.71 times less return on investment than KNOT Offshore. In addition to that, WT Offshore is 1.24 times more volatile than KNOT Offshore Partners. It trades about 0.04 of its total potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.12 per unit of volatility. If you would invest  539.00  in KNOT Offshore Partners on December 26, 2024 and sell it today you would earn a total of  98.00  from holding KNOT Offshore Partners or generate 18.18% return on investment over 90 days.

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

WT Offshore  vs.  KNOT Offshore Partners

WT Offshore

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WT Offshore are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, WT Offshore may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KNOT Offshore Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 9 (%) 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.

Pair Trading with WT Offshore and KNOT Offshore

The main advantage of trading using opposite WT Offshore and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Offshore 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 WT Offshore 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.