Correlation Between KNOT Offshore and Park Ohio

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

Diversification Opportunities for KNOT Offshore and Park Ohio

0.1

Correlation Coefficient

KNOT Offshore  Park Ohio

Average diversification

The 3 months correlation between KNOT and Park is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and Park Ohio go up and down completely randomly.

Pair Corralation between KNOT Offshore and Park Ohio

Given the investment horizon of 90 days KNOT Offshore Partners is expected to generate 0.82 times more return on investment than Park Ohio. However, KNOT Offshore Partners is 1.22 times less risky than Park Ohio. It trades about -0.32 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about -0.59 per unit of risk. If you would invest  602.00  in KNOT Offshore Partners on September 26, 2024 and sell it today you would lose (59.00) from holding KNOT Offshore Partners or give up 9.8% of portfolio value over 90 days.

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

KNOT Offshore Partners  vs.  Park Ohio Holdings

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 abnormal 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.

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with KNOT Offshore and Park Ohio

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

The idea behind KNOT Offshore Partners and Park Ohio Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.