Correlation Between 2020 Bulkers and BW Offshore

Can any of the company-specific risk be diversified away by investing in both 2020 Bulkers 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 2020 Bulkers and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2020 Bulkers and BW Offshore, you can compare the effects of market volatilities on 2020 Bulkers 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 2020 Bulkers with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2020 Bulkers and BW Offshore.

Diversification Opportunities for 2020 Bulkers and BW Offshore

0.35

Correlation Coefficient

2020 Bulkers  BW Offshore

Weak diversification

The 3 months correlation between 2020 and BWO is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding 2020 Bulkers and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and 2020 Bulkers 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 2020 Bulkers 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 2020 Bulkers i.e., 2020 Bulkers and BW Offshore go up and down completely randomly.

Pair Corralation between 2020 Bulkers and BW Offshore

Assuming the 90 days trading horizon 2020 Bulkers is expected to generate 1.16 times less return on investment than BW Offshore. In addition to that, 2020 Bulkers is 1.15 times more volatile than BW Offshore. It trades about 0.06 of its total potential returns per unit of risk. BW Offshore is currently generating about 0.08 per unit of volatility. If you would invest  2,790  in BW Offshore on November 29, 2024 and sell it today you would earn a total of  250.00  from holding BW Offshore or generate 8.96% return on investment over 90 days.

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

2020 Bulkers  vs.  BW Offshore

2020 Bulkers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 2020 Bulkers are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, 2020 Bulkers may actually be approaching a critical reversion point that can send shares even higher in March 2025.

BW Offshore

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with 2020 Bulkers and BW Offshore

The main advantage of trading using opposite 2020 Bulkers and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2020 Bulkers 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 2020 Bulkers 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.