Correlation Between Nasdaq and KNOT Offshore
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and KNOT Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and KNOT Offshore Partners, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and KNOT Offshore.
Diversification Opportunities for Nasdaq and KNOT Offshore
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and KNOT is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc 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 Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and KNOT Offshore go up and down completely randomly.
Pair Corralation between Nasdaq and KNOT Offshore
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.54 times more return on investment than KNOT Offshore. However, Nasdaq Inc is 1.86 times less risky than KNOT Offshore. It trades about 0.24 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about -0.22 per unit of risk. If you would invest 7,115 in Nasdaq Inc on September 3, 2024 and sell it today you would earn a total of 1,184 from holding Nasdaq Inc or generate 16.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. KNOT Offshore Partners
Performance |
| Timeline |
| Nasdaq Inc |
| KNOT Offshore Partners |
Nasdaq and KNOT Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and KNOT Offshore
The main advantage of trading using opposite Nasdaq and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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.| KNOT Offshore vs. International Seaways | KNOT Offshore vs. Scorpio Tankers | KNOT Offshore vs. Dorian LPG | KNOT Offshore vs. Teekay Tankers |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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