Correlation Between KNOT Offshore and Air Products

Can any of the company-specific risk be diversified away by investing in both KNOT Offshore and Air Products 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 Air Products 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 Air Products and, you can compare the effects of market volatilities on KNOT Offshore and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of KNOT Offshore and Air Products.

Diversification Opportunities for KNOT Offshore and Air Products

-0.66

Correlation Coefficient

KNOT Offshore  Air Products

Excellent diversification

The 3 months correlation between KNOT and Air is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Air Products go up and down completely randomly.

Pair Corralation between KNOT Offshore and Air Products

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Air Products. In addition to that, KNOT Offshore is 1.96 times more volatile than Air Products and. It trades about -0.29 of its total potential returns per unit of risk. Air Products and is currently generating about -0.34 per unit of volatility. If you would invest  32,789  in Air Products and on September 17, 2024 and sell it today you would lose (1,559) from holding Air Products and or give up 4.75% of portfolio value over 90 days.

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

KNOT Offshore Partners  vs.  Air Products and

KNOT Offshore Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNOT Offshore Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Air Products

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KNOT Offshore and Air Products

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

The idea behind KNOT Offshore Partners and Air Products and 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.