Correlation Between BW Offshore and Panoro Energy

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

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

Diversification Opportunities for BW Offshore and Panoro Energy

0.69

Correlation Coefficient

BW Offshore  Panoro Energy

Poor diversification

The 3 months correlation between BWO and Panoro is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Panoro Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panoro Energy 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 Panoro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panoro Energy ASA has no effect on the direction of BW Offshore i.e., BW Offshore and Panoro Energy go up and down completely randomly.

Pair Corralation between BW Offshore and Panoro Energy

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.1 times more return on investment than Panoro Energy. However, BW Offshore is 1.1 times more volatile than Panoro Energy ASA. It trades about 0.1 of its potential returns per unit of risk. Panoro Energy ASA is currently generating about 0.01 per unit of risk. If you would invest  2,810  in BW Offshore on November 20, 2024 and sell it today you would earn a total of  325.00  from holding BW Offshore or generate 11.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

BW Offshore  vs.  Panoro Energy ASA

BW Offshore

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BW Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Panoro Energy ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Panoro Energy ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Panoro Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BW Offshore and Panoro Energy

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

The idea behind BW Offshore and Panoro Energy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.