Correlation Between BW Offshore and Nordic Mining

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

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

Diversification Opportunities for BW Offshore and Nordic Mining

0.55

Correlation Coefficient

BW Offshore  Nordic Mining

Very weak diversification

The 3 months correlation between BWO and Nordic is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Nordic Mining ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Mining 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 Nordic Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Mining ASA has no effect on the direction of BW Offshore i.e., BW Offshore and Nordic Mining go up and down completely randomly.

Pair Corralation between BW Offshore and Nordic Mining

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.26 times less return on investment than Nordic Mining. In addition to that, BW Offshore is 1.38 times more volatile than Nordic Mining ASA. It trades about 0.04 of its total potential returns per unit of risk. Nordic Mining ASA is currently generating about 0.06 per unit of volatility. If you would invest  2,378  in Nordic Mining ASA on September 3, 2024 and sell it today you would earn a total of  163.00  from holding Nordic Mining ASA or generate 6.85% return on investment over 90 days.

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

BW Offshore  vs.  Nordic Mining ASA

BW Offshore

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 2 (%) 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.

Nordic Mining ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Mining ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Nordic Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BW Offshore and Nordic Mining

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

The idea behind BW Offshore and Nordic Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.