Correlation Between Belships and BW LPG

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

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

Diversification Opportunities for Belships and BW LPG

0.37

Correlation Coefficient

Belships  BW LPG

Weak diversification

The 3 months correlation between Belships and BWLPG is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Belships and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG and Belships 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 Belships 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 has no effect on the direction of Belships i.e., Belships and BW LPG go up and down completely randomly.

Pair Corralation between Belships and BW LPG

Assuming the 90 days trading horizon Belships is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, Belships is 10.24 times less risky than BW LPG. The stock trades about -0.11 of its potential returns per unit of risk. The BW LPG is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  12,050  in BW LPG on October 24, 2024 and sell it today you would earn a total of  1,930  from holding BW LPG or generate 16.02% return on investment over 90 days.

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

Belships  vs.  BW LPG

Belships

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Belships are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Belships displayed solid returns over the last few months and may actually be approaching a breakup point.

BW LPG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW LPG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BW LPG is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Belships and BW LPG

The main advantage of trading using opposite Belships and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belships 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 Belships and BW LPG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.