Correlation Between Western Acquisition and KNOT Offshore
Can any of the company-specific risk be diversified away by investing in both Western Acquisition 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 Western Acquisition and KNOT Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Acquisition Ventures and KNOT Offshore Partners, you can compare the effects of market volatilities on Western Acquisition 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 Western Acquisition with a short position of KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and KNOT Offshore.
Diversification Opportunities for Western Acquisition and KNOT Offshore
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and KNOT is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures 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 Western Acquisition 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 Western Acquisition Ventures 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 Western Acquisition i.e., Western Acquisition and KNOT Offshore go up and down completely randomly.
Pair Corralation between Western Acquisition and KNOT Offshore
Given the investment horizon of 90 days Western Acquisition Ventures is expected to generate 1.05 times more return on investment than KNOT Offshore. However, Western Acquisition is 1.05 times more volatile than KNOT Offshore Partners. It trades about 0.05 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 1,038 in Western Acquisition Ventures on September 3, 2024 and sell it today you would earn a total of 54.00 from holding Western Acquisition Ventures or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Acquisition Ventures vs. KNOT Offshore Partners
Performance |
| Timeline |
| Western Acquisition |
| KNOT Offshore Partners |
Western Acquisition and KNOT Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Acquisition and KNOT Offshore
The main advantage of trading using opposite Western Acquisition and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition 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 Western Acquisition Ventures 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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