Correlation Between Albemarle and KNOT Offshore

Can any of the company-specific risk be diversified away by investing in both Albemarle and KNOT Offshore 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 Albemarle and KNOT Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Albemarle and KNOT Offshore Partners, you can compare the effects of market volatilities on Albemarle and KNOT Offshore 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 Albemarle with a short position of KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and KNOT Offshore.

Diversification Opportunities for Albemarle and KNOT Offshore

0.73

Correlation Coefficient

Albemarle  KNOT Offshore

Poor diversification

The 3 months correlation between Albemarle and KNOT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners and Albemarle 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 Albemarle are associated (or correlated) with KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of Albemarle i.e., Albemarle and KNOT Offshore go up and down completely randomly.

Pair Corralation between Albemarle and KNOT Offshore

Assuming the 90 days trading horizon Albemarle is expected to generate 1.45 times more return on investment than KNOT Offshore. However, Albemarle is 1.45 times more volatile than KNOT Offshore Partners. It trades about 0.09 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.08 per unit of risk. If you would invest  2,956  in Albemarle on May 6, 2025 and sell it today you would earn a total of  429.00  from holding Albemarle or generate 14.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Albemarle  vs.  KNOT Offshore Partners

Albemarle

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Albemarle sustained solid returns over the last few months and may actually be approaching a breakup point.

KNOT Offshore Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KNOT Offshore Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KNOT Offshore may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Albemarle and KNOT Offshore

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

The idea behind Albemarle and KNOT Offshore Partners 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 Anywhere module to track or share privately all of your investments from the convenience of any device.