Correlation Between BW Offshore and Guaranty Trust

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

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

Diversification Opportunities for BW Offshore and Guaranty Trust

-0.43

Correlation Coefficient

BW Offshore  Guaranty Trust

Very good diversification

The 3 months correlation between 0RKH and Guaranty is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of BW Offshore i.e., BW Offshore and Guaranty Trust go up and down completely randomly.

Pair Corralation between BW Offshore and Guaranty Trust

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.21 times less return on investment than Guaranty Trust. In addition to that, BW Offshore is 1.24 times more volatile than Guaranty Trust Holding. It trades about 0.02 of its total potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.03 per unit of volatility. If you would invest  180.00  in Guaranty Trust Holding on September 4, 2024 and sell it today you would earn a total of  5.00  from holding Guaranty Trust Holding or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

BW Offshore  vs.  Guaranty Trust Holding

BW Offshore

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 1 (%) 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.

Guaranty Trust Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Guaranty Trust is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BW Offshore and Guaranty Trust

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

The idea behind BW Offshore and Guaranty Trust Holding 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.