Correlation Between KNOT Offshore and Matson

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

Diversification Opportunities for KNOT Offshore and Matson

-0.68

Correlation Coefficient

KNOT Offshore  Matson

Excellent diversification

The 3 months correlation between KNOT and Matson is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Matson Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matson 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 Matson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matson Inc has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Matson go up and down completely randomly.

Pair Corralation between KNOT Offshore and Matson

Given the investment horizon of 90 days KNOT Offshore Partners is expected to under-perform the Matson. But the stock apears to be less risky and, when comparing its historical volatility, KNOT Offshore Partners is 1.42 times less risky than Matson. The stock trades about -0.22 of its potential returns per unit of risk. The Matson Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  13,440  in Matson Inc on September 1, 2024 and sell it today you would earn a total of  1,878  from holding Matson Inc or generate 13.97% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  Matson 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 December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Matson Inc

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with KNOT Offshore and Matson

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

The idea behind KNOT Offshore Partners and Matson 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.