Correlation Between KNOT Offshore and Avient Corp

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

Diversification Opportunities for KNOT Offshore and Avient Corp

-0.32

Correlation Coefficient

KNOT Offshore  Avient Corp

Very good diversification

The 3 months correlation between KNOT and Avient is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Avient Corp go up and down completely randomly.

Pair Corralation between KNOT Offshore and Avient Corp

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Avient Corp. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 1.07 times less risky than Avient Corp. The stock trades about -0.16 of its potential returns per unit of risk. The Avient Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,733  in Avient Corp on September 17, 2024 and sell it today you would earn a total of  19.00  from holding Avient Corp or generate 0.4% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Avient Corp

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.

Avient Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Avient Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KNOT Offshore and Avient Corp

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

The idea behind KNOT Offshore Partners and Avient Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.