Correlation Between BW Offshore and Aker Solutions

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

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

Diversification Opportunities for BW Offshore and Aker Solutions

0.67

Correlation Coefficient

BW Offshore  Aker Solutions

Poor diversification

The 3 months correlation between BWO and Aker is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Aker Solutions ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Solutions ASA and BW Offshore 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 Offshore are associated (or correlated) with Aker Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Solutions ASA has no effect on the direction of BW Offshore i.e., BW Offshore and Aker Solutions go up and down completely randomly.

Pair Corralation between BW Offshore and Aker Solutions

Assuming the 90 days trading horizon BW Offshore is expected to generate 2.1 times less return on investment than Aker Solutions. But when comparing it to its historical volatility, BW Offshore is 1.13 times less risky than Aker Solutions. It trades about 0.04 of its potential returns per unit of risk. Aker Solutions ASA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,110  in Aker Solutions ASA on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Aker Solutions ASA or generate 9.32% return on investment over 90 days.

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

BW Offshore  vs.  Aker Solutions ASA

BW Offshore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, BW Offshore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aker Solutions ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Solutions ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker Solutions may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BW Offshore and Aker Solutions

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

The idea behind BW Offshore and Aker Solutions 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.