Correlation Between BW LPG and Japan Asia

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

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

Diversification Opportunities for BW LPG and Japan Asia

0.04

Correlation Coefficient

BW LPG  Japan Asia

Significant diversification

The 3 months correlation between BW9 and Japan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG Limited and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment and BW LPG 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 BW LPG Limited are associated (or correlated) with Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of BW LPG i.e., BW LPG and Japan Asia go up and down completely randomly.

Pair Corralation between BW LPG and Japan Asia

Assuming the 90 days horizon BW LPG Limited is expected to under-perform the Japan Asia. But the stock apears to be less risky and, when comparing its historical volatility, BW LPG Limited is 1.58 times less risky than Japan Asia. The stock trades about -0.03 of its potential returns per unit of risk. The Japan Asia Investment is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Japan Asia Investment on October 10, 2024 and sell it today you would lose (6.00) from holding Japan Asia Investment or give up 4.55% of portfolio value over 90 days.

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

BW LPG Limited  vs.  Japan Asia Investment

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Japan Asia Investment

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BW LPG and Japan Asia

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

The idea behind BW LPG Limited and Japan Asia Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.