Correlation Between Knife River and International Seaways

Can any of the company-specific risk be diversified away by investing in both Knife River and International Seaways 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 Knife River and International Seaways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Knife River and International Seaways, you can compare the effects of market volatilities on Knife River and International Seaways 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 Knife River with a short position of International Seaways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and International Seaways.

Diversification Opportunities for Knife River and International Seaways

-0.6

Correlation Coefficient

Knife River  International Seaways

Excellent diversification

The 3 months correlation between Knife and International is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and International Seaways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Seaways and Knife River 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 Knife River are associated (or correlated) with International Seaways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Seaways has no effect on the direction of Knife River i.e., Knife River and International Seaways go up and down completely randomly.

Pair Corralation between Knife River and International Seaways

Considering the 90-day investment horizon Knife River is expected to generate 1.19 times more return on investment than International Seaways. However, Knife River is 1.19 times more volatile than International Seaways. It trades about 0.23 of its potential returns per unit of risk. International Seaways is currently generating about -0.17 per unit of risk. If you would invest  7,568  in Knife River on September 3, 2024 and sell it today you would earn a total of  2,782  from holding Knife River or generate 36.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Knife River  vs.  International Seaways

Knife River

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

International Seaways

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Seaways has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Knife River and International Seaways

The main advantage of trading using opposite Knife River and International Seaways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, International Seaways 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 International Seaways will offset losses from the drop in International Seaways' long position.

The idea behind Knife River and International Seaways 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.