Correlation Between Clarkson PLC and BW LPG

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

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

Diversification Opportunities for Clarkson PLC and BW LPG

-0.61

Correlation Coefficient

Clarkson PLC  BW LPG

Excellent diversification

The 3 months correlation between Clarkson and BW9 is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Clarkson PLC and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and Clarkson PLC 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 Clarkson PLC are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of Clarkson PLC i.e., Clarkson PLC and BW LPG go up and down completely randomly.

Pair Corralation between Clarkson PLC and BW LPG

Assuming the 90 days horizon Clarkson PLC is expected to generate 1.15 times more return on investment than BW LPG. However, Clarkson PLC is 1.15 times more volatile than BW LPG Limited. It trades about 0.19 of its potential returns per unit of risk. BW LPG Limited is currently generating about -0.5 per unit of risk. If you would invest  4,320  in Clarkson PLC on September 23, 2024 and sell it today you would earn a total of  440.00  from holding Clarkson PLC or generate 10.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Clarkson PLC  vs.  BW LPG Limited

Clarkson PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clarkson PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clarkson PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Clarkson PLC and BW LPG

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

The idea behind Clarkson PLC and BW LPG Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.