Correlation Between BW Offshore and European Metals

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

By analyzing existing cross correlation between BW Offshore and European Metals Holdings, you can compare the effects of market volatilities on BW Offshore and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and European Metals.

Diversification Opportunities for BW Offshore and European Metals

0.02

Correlation Coefficient

BW Offshore  European Metals

Significant diversification

The 3 months correlation between 0RKH and European is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of BW Offshore i.e., BW Offshore and European Metals go up and down completely randomly.

Pair Corralation between BW Offshore and European Metals

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.7 times less return on investment than European Metals. But when comparing it to its historical volatility, BW Offshore is 1.98 times less risky than European Metals. It trades about 0.09 of its potential returns per unit of risk. European Metals Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  725.00  in European Metals Holdings on December 23, 2024 and sell it today you would earn a total of  150.00  from holding European Metals Holdings or generate 20.69% return on investment over 90 days.

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

BW Offshore  vs.  European Metals Holdings

BW Offshore

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BW Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

European Metals Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Metals Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, European Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW Offshore and European Metals

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

The idea behind BW Offshore and European Metals 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.