Correlation Between BW LPG and Dno ASA

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

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

Diversification Opportunities for BW LPG and Dno ASA

0.07

Correlation Coefficient

BW LPG  Dno ASA

Significant diversification

The 3 months correlation between BWLPG and Dno is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and Dno ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dno ASA 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 are associated (or correlated) with Dno ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dno ASA has no effect on the direction of BW LPG i.e., BW LPG and Dno ASA go up and down completely randomly.

Pair Corralation between BW LPG and Dno ASA

Assuming the 90 days trading horizon BW LPG is expected to under-perform the Dno ASA. But the stock apears to be less risky and, when comparing its historical volatility, BW LPG is 1.09 times less risky than Dno ASA. The stock trades about -0.01 of its potential returns per unit of risk. The Dno ASA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,021  in Dno ASA on December 29, 2024 and sell it today you would earn a total of  393.00  from holding Dno ASA or generate 38.49% return on investment over 90 days.

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

BW LPG  vs.  Dno ASA

BW LPG

Risk-Adjusted Performance

Very Weak

Over the last 90 days BW LPG has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Dno ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dno ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Dno ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW LPG and Dno ASA

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

The idea behind BW LPG and Dno 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.