Correlation Between KNOT Offshore and WT Offshore

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

Diversification Opportunities for KNOT Offshore and WT Offshore

0.38

Correlation Coefficient

KNOT Offshore  WT Offshore

Weak diversification

The 3 months correlation between KNOT and WTI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KNOT Offshore Partners and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore 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 WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of KNOT Offshore i.e., KNOT Offshore and WT Offshore go up and down completely randomly.

Pair Corralation between KNOT Offshore and WT Offshore

Given the investment horizon of 90 days KNOT Offshore is expected to generate 4.49 times less return on investment than WT Offshore. But when comparing it to its historical volatility, KNOT Offshore Partners is 2.22 times less risky than WT Offshore. It trades about 0.08 of its potential returns per unit of risk. WT Offshore is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  115.00  in WT Offshore on May 6, 2025 and sell it today you would earn a total of  55.00  from holding WT Offshore or generate 47.83% return on investment over 90 days.

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

KNOT Offshore Partners  vs.  WT Offshore

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 unsteady basic indicators, KNOT Offshore may actually be approaching a critical reversion point that can send shares even higher in September 2025.

WT Offshore

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WT Offshore are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, WT Offshore demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNOT Offshore and WT Offshore

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

The idea behind KNOT Offshore Partners and WT Offshore 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.