Correlation Between BW Offshore and Legacy Education

Can any of the company-specific risk be diversified away by investing in both BW Offshore and Legacy Education 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 Legacy Education 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 Legacy Education, you can compare the effects of market volatilities on BW Offshore and Legacy Education 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 Legacy Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Legacy Education.

Diversification Opportunities for BW Offshore and Legacy Education

-0.14

Correlation Coefficient

BW Offshore  Legacy Education

Good diversification

The 3 months correlation between BWOFY and Legacy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of BW Offshore i.e., BW Offshore and Legacy Education go up and down completely randomly.

Pair Corralation between BW Offshore and Legacy Education

Assuming the 90 days horizon BW Offshore Limited is expected to generate 0.32 times more return on investment than Legacy Education. However, BW Offshore Limited is 3.13 times less risky than Legacy Education. It trades about -0.04 of its potential returns per unit of risk. Legacy Education is currently generating about -0.03 per unit of risk. If you would invest  524.00  in BW Offshore Limited on December 29, 2024 and sell it today you would lose (23.00) from holding BW Offshore Limited or give up 4.39% of portfolio value over 90 days.

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

BW Offshore Limited  vs.  Legacy Education

BW Offshore Limited

Risk-Adjusted Performance

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 fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Legacy Education

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BW Offshore and Legacy Education

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

The idea behind BW Offshore Limited and Legacy Education 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.