Correlation Between KNOT Offshore and Bank of America
Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on KNOT Offshore and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and Bank of America.
Diversification Opportunities for KNOT Offshore and Bank of America
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KNOT and Bank is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Bank of America go up and down completely randomly.
Pair Corralation between KNOT Offshore and Bank of America
Given the investment horizon of 90 days KNOT Offshore is expected to generate 1.36 times less return on investment than Bank of America. In addition to that, KNOT Offshore is 4.16 times more volatile than Bank of America. It trades about 0.02 of its total potential returns per unit of risk. Bank of America is currently generating about 0.11 per unit of volatility. If you would invest 1,769 in Bank of America on September 1, 2024 and sell it today you would earn a total of 529.00 from holding Bank of America or generate 29.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KNOT Offshore Partners vs. Bank of America
Performance |
| Timeline |
| KNOT Offshore Partners |
| Bank of America |
KNOT Offshore and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KNOT Offshore and Bank of America
The main advantage of trading using opposite KNOT Offshore and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KNOT Offshore position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| KNOT Offshore vs. USA Compression Partners | KNOT Offshore vs. Dynagas LNG Partners | KNOT Offshore vs. Crossamerica Partners LP | KNOT Offshore vs. Delek Logistics Partners |
| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Bank of America |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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