Correlation Between Borr Drilling and BW Offshore

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

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

Diversification Opportunities for Borr Drilling and BW Offshore

-0.85

Correlation Coefficient

Borr Drilling  BW Offshore

Pay attention - limited upside

The 3 months correlation between Borr and BWOFY is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Borr Drilling 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 Borr Drilling 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 Limited has no effect on the direction of Borr Drilling i.e., Borr Drilling and BW Offshore go up and down completely randomly.

Pair Corralation between Borr Drilling and BW Offshore

Given the investment horizon of 90 days Borr Drilling is expected to under-perform the BW Offshore. In addition to that, Borr Drilling is 2.31 times more volatile than BW Offshore Limited. It trades about -0.01 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about 0.04 per unit of volatility. If you would invest  459.00  in BW Offshore Limited on October 11, 2024 and sell it today you would earn a total of  96.00  from holding BW Offshore Limited or generate 20.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	82.86%
Values	Daily Returns

Borr Drilling  vs.  BW Offshore Limited

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

BW Offshore Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Borr Drilling and BW Offshore

The main advantage of trading using opposite Borr Drilling and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Borr Drilling 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 Borr Drilling and BW Offshore 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.