Correlation Between KNOT Offshore and Eastman Chemical

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

Diversification Opportunities for KNOT Offshore and Eastman Chemical

0.67

Correlation Coefficient

KNOT Offshore  Eastman Chemical

Poor diversification

The 3 months correlation between KNOT and Eastman is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Eastman Chemical go up and down completely randomly.

Pair Corralation between KNOT Offshore and Eastman Chemical

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Eastman Chemical. In addition to that, KNOT Offshore is 1.31 times more volatile than Eastman Chemical. It trades about -0.29 of its total potential returns per unit of risk. Eastman Chemical is currently generating about -0.24 per unit of volatility. If you would invest  10,401  in Eastman Chemical on September 17, 2024 and sell it today you would lose (551.00) from holding Eastman Chemical or give up 5.3% of portfolio value over 90 days.

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

KNOT Offshore Partners  vs.  Eastman Chemical

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.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with KNOT Offshore and Eastman Chemical

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

The idea behind KNOT Offshore Partners and Eastman Chemical 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..