Correlation Between BW Offshore and Bank of Ireland

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

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

Diversification Opportunities for BW Offshore and Bank of Ireland

0.45

Correlation Coefficient

BW Offshore  Bank of Ireland

Very weak diversification

The 3 months correlation between 0RKH and Bank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland and BW 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 BW Offshore are associated (or correlated) with Bank of Ireland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland has no effect on the direction of BW Offshore i.e., BW Offshore and Bank of Ireland go up and down completely randomly.

Pair Corralation between BW Offshore and Bank of Ireland

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.19 times more return on investment than Bank of Ireland. However, BW Offshore is 1.19 times more volatile than Bank of Ireland. It trades about 0.04 of its potential returns per unit of risk. Bank of Ireland is currently generating about 0.02 per unit of risk. If you would invest  2,192  in BW Offshore on October 9, 2024 and sell it today you would earn a total of  946.00  from holding BW Offshore or generate 43.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

BW Offshore  vs.  Bank of Ireland

BW Offshore

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Ireland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bank of Ireland is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BW Offshore and Bank of Ireland

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

The idea behind BW Offshore and Bank of Ireland 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..