Correlation Between BW Offshore and Borr Drilling

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

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

Diversification Opportunities for BW Offshore and Borr Drilling

-0.33

Correlation Coefficient

BW Offshore  Borr Drilling

Very good diversification

The 3 months correlation between BWOFY and Borr is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling 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 Limited are associated (or correlated) with Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of BW Offshore i.e., BW Offshore and Borr Drilling go up and down completely randomly.

Pair Corralation between BW Offshore and Borr Drilling

Assuming the 90 days horizon BW Offshore Limited is expected to under-perform the Borr Drilling. But the pink sheet apears to be less risky and, when comparing its historical volatility, BW Offshore Limited is 1.67 times less risky than Borr Drilling. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Borr Drilling is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  374.00  in Borr Drilling on October 26, 2024 and sell it today you would lose (23.00) from holding Borr Drilling or give up 6.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

BW Offshore Limited  vs.  Borr Drilling

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BW Offshore and Borr Drilling

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

The idea behind BW Offshore Limited and Borr Drilling 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 Transaction History module to view history of all your transactions and understand their impact on performance.