Correlation Between KNOT Offshore and Nature Wood
Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and Nature Wood 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 Nature Wood 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 Nature Wood Group, you can compare the effects of market volatilities on KNOT Offshore and Nature Wood 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 Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and Nature Wood.
Diversification Opportunities for KNOT Offshore and Nature Wood
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between KNOT and Nature is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood 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 Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Nature Wood go up and down completely randomly.
Pair Corralation between KNOT Offshore and Nature Wood
Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Nature Wood. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 2.13 times less risky than Nature Wood. The stock trades about -0.1 of its potential returns per unit of risk. The Nature Wood Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 141.00 in Nature Wood Group on September 1, 2024 and sell it today you would lose (5.00) from holding Nature Wood Group or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KNOT Offshore Partners vs. Nature Wood Group
Performance |
| Timeline |
| KNOT Offshore Partners |
| Nature Wood Group |
KNOT Offshore and Nature Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KNOT Offshore and Nature Wood
The main advantage of trading using opposite KNOT Offshore and Nature Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KNOT Offshore position performs unexpectedly, Nature Wood 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 Nature Wood will offset losses from the drop in Nature Wood'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 |
| Nature Wood vs. NETGEAR | Nature Wood vs. Chester Mining | Nature Wood vs. Highway Holdings Limited | Nature Wood vs. Inflection Point Acquisition |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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