Correlation Between BW Energy and Havila Shipping

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Can any of the company-specific risk be diversified away by investing in both BW Energy and Havila Shipping 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 Energy and Havila Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Energy and Havila Shipping ASA, you can compare the effects of market volatilities on BW Energy and Havila Shipping 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 Energy with a short position of Havila Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Energy and Havila Shipping.

Diversification Opportunities for BW Energy and Havila Shipping

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between BWE and Havila is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BW Energy and Havila Shipping ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Havila Shipping ASA and BW Energy 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 Energy are associated (or correlated) with Havila Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Havila Shipping ASA has no effect on the direction of BW Energy i.e., BW Energy and Havila Shipping go up and down completely randomly.

Pair Corralation between BW Energy and Havila Shipping

Assuming the 90 days trading horizon BW Energy is expected to generate 0.53 times more return on investment than Havila Shipping. However, BW Energy is 1.88 times less risky than Havila Shipping. It trades about -0.07 of its potential returns per unit of risk. Havila Shipping ASA is currently generating about -0.06 per unit of risk. If you would invest  2,525  in BW Energy on September 6, 2024 and sell it today you would lose (265.00) from holding BW Energy or give up 10.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

BW Energy  vs.  Havila Shipping ASA

 Performance 
       Timeline  
BW Energy 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days BW Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Havila Shipping ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Havila Shipping ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BW Energy and Havila Shipping Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BW Energy and Havila Shipping

The main advantage of trading using opposite BW Energy and Havila Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Energy position performs unexpectedly, Havila Shipping 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 Havila Shipping will offset losses from the drop in Havila Shipping's long position.
The idea behind BW Energy and Havila Shipping ASA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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