Correlation Between Odfjell Drilling and BW Offshore

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Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling and BW 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 Odfjell Drilling and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and BW Offshore, you can compare the effects of market volatilities on Odfjell Drilling and BW 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 Odfjell Drilling with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and BW Offshore.

Diversification Opportunities for Odfjell Drilling and BW Offshore

Odfjell0RKHDiversified AwayOdfjell0RKHDiversified Away100%
0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Odfjell and 0RKH is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Odfjell Drilling 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 Odfjell Drilling are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Odfjell Drilling i.e., Odfjell Drilling and BW Offshore go up and down completely randomly.

Pair Corralation between Odfjell Drilling and BW Offshore

Assuming the 90 days trading horizon Odfjell Drilling is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Odfjell Drilling is 1.22 times less risky than BW Offshore. The stock trades about -0.04 of its potential returns per unit of risk. The BW Offshore is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,680  in BW Offshore on September 22, 2024 and sell it today you would earn a total of  63.00  from holding BW Offshore or generate 2.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Odfjell Drilling  vs.  BW Offshore

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505101520
JavaScript chart by amCharts 3.21.150QHX 0RKH
       Timeline  
Odfjell Drilling 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Odfjell Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Odfjell Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec40455055
BW Offshore 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2526272829303132

Odfjell Drilling and BW Offshore Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.44-2.58-1.71-0.850.00.831.682.533.38 0.050.060.070.08
JavaScript chart by amCharts 3.21.150QHX 0RKH
       Returns  

Pair Trading with Odfjell Drilling and BW Offshore

The main advantage of trading using opposite Odfjell Drilling and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling position performs unexpectedly, BW 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 BW Offshore will offset losses from the drop in BW Offshore's long position.
The idea behind Odfjell Drilling and BW 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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