Correlation Between BW Offshore and SpareBank

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

By analyzing existing cross correlation between BW Offshore and SpareBank 1 stlandet, you can compare the effects of market volatilities on BW Offshore and SpareBank 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 SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and SpareBank.

Diversification Opportunities for BW Offshore and SpareBank

0.35

Correlation Coefficient

BW Offshore  SpareBank

Weak diversification

The 3 months correlation between BWO and SpareBank is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and SpareBank 1 stlandet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 stlandet 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 SpareBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpareBank 1 stlandet has no effect on the direction of BW Offshore i.e., BW Offshore and SpareBank go up and down completely randomly.

Pair Corralation between BW Offshore and SpareBank

Assuming the 90 days trading horizon BW Offshore is expected to generate 2.15 times less return on investment than SpareBank. In addition to that, BW Offshore is 1.91 times more volatile than SpareBank 1 stlandet. It trades about 0.04 of its total potential returns per unit of risk. SpareBank 1 stlandet is currently generating about 0.17 per unit of volatility. If you would invest  14,844  in SpareBank 1 stlandet on December 30, 2024 and sell it today you would earn a total of  1,606  from holding SpareBank 1 stlandet or generate 10.82% return on investment over 90 days.

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

BW Offshore  vs.  SpareBank 1 stlandet

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.

SpareBank 1 stlandet

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 stlandet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, SpareBank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BW Offshore and SpareBank

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

The idea behind BW Offshore and SpareBank 1 stlandet 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.