Correlation Between KNOT Offshore and Mesa Air
Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and Mesa Air 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 Mesa Air 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 Mesa Air Group, you can compare the effects of market volatilities on KNOT Offshore and Mesa Air 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 Mesa Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and Mesa Air.
Diversification Opportunities for KNOT Offshore and Mesa Air
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KNOT and Mesa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Mesa Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Air Group 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 Mesa Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Air Group has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Mesa Air go up and down completely randomly.
Pair Corralation between KNOT Offshore and Mesa Air
Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Mesa Air. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 2.08 times less risky than Mesa Air. The stock trades about -0.08 of its potential returns per unit of risk. The Mesa Air Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 92.00 in Mesa Air Group on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Mesa Air Group or generate 10.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KNOT Offshore Partners vs. Mesa Air Group
Performance |
| Timeline |
| KNOT Offshore Partners |
| Mesa Air Group |
KNOT Offshore and Mesa Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KNOT Offshore and Mesa Air
The main advantage of trading using opposite KNOT Offshore and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KNOT Offshore position performs unexpectedly, Mesa Air 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 Mesa Air will offset losses from the drop in Mesa Air'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 |
| Mesa Air vs. Allegiant Travel | Mesa Air vs. Sun Country Airlines | Mesa Air vs. Frontier Group Holdings | Mesa Air vs. Azul SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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