Correlation Between KNOT Offshore and Ecolab

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

Diversification Opportunities for KNOT Offshore and Ecolab

0.46

Correlation Coefficient

KNOT Offshore  Ecolab

Very weak diversification

The 3 months correlation between KNOT and Ecolab is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Ecolab go up and down completely randomly.

Pair Corralation between KNOT Offshore and Ecolab

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Ecolab. In addition to that, KNOT Offshore is 2.16 times more volatile than Ecolab Inc. It trades about -0.29 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.14 per unit of volatility. If you would invest  24,597  in Ecolab Inc on September 17, 2024 and sell it today you would earn a total of  423.00  from holding Ecolab Inc or generate 1.72% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Ecolab Inc

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.

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KNOT Offshore and Ecolab

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

The idea behind KNOT Offshore Partners and Ecolab Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .