Correlation Between KNOT Offshore and Bridgford Foods

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

Diversification Opportunities for KNOT Offshore and Bridgford Foods

-0.53

Correlation Coefficient

KNOT Offshore  Bridgford Foods

Excellent diversification

The 3 months correlation between KNOT and Bridgford is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods 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 Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Bridgford Foods go up and down completely randomly.

Pair Corralation between KNOT Offshore and Bridgford Foods

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Bridgford Foods. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 1.64 times less risky than Bridgford Foods. The stock trades about -0.49 of its potential returns per unit of risk. The Bridgford Foods is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  925.00  in Bridgford Foods on September 21, 2024 and sell it today you would earn a total of  120.00  from holding Bridgford Foods or generate 12.97% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Bridgford Foods

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.

Bridgford Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and Bridgford Foods

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

The idea behind KNOT Offshore Partners and Bridgford Foods 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.