Correlation Between SWISS WATER and BW OFFSHORE

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

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

Diversification Opportunities for SWISS WATER and BW OFFSHORE

-0.56

Correlation Coefficient

SWISS WATER  BW OFFSHORE

Excellent diversification

The 3 months correlation between SWISS and XY81 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD and SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 LTD has no effect on the direction of SWISS WATER i.e., SWISS WATER and BW OFFSHORE go up and down completely randomly.

Pair Corralation between SWISS WATER and BW OFFSHORE

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the BW OFFSHORE. In addition to that, SWISS WATER is 1.38 times more volatile than BW OFFSHORE LTD. It trades about -0.07 of its total potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.11 per unit of volatility. If you would invest  216.00  in BW OFFSHORE LTD on December 19, 2024 and sell it today you would earn a total of  30.00  from holding BW OFFSHORE LTD or generate 13.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  BW OFFSHORE LTD

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

Very Weak

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

BW OFFSHORE LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and BW OFFSHORE

The main advantage of trading using opposite SWISS WATER and BW OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER 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 SWISS WATER DECAFFCOFFEE and BW OFFSHORE LTD 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.