Correlation Between ChampionX and BW LPG

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

By analyzing existing cross correlation between ChampionX and BW LPG Limited, you can compare the effects of market volatilities on ChampionX and BW LPG 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 ChampionX with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChampionX and BW LPG.

Diversification Opportunities for ChampionX and BW LPG

0.59

Correlation Coefficient

ChampionX  BW LPG

Very weak diversification

The 3 months correlation between ChampionX and BWLP is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ChampionX and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and ChampionX 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 ChampionX are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of ChampionX i.e., ChampionX and BW LPG go up and down completely randomly.

Pair Corralation between ChampionX and BW LPG

Considering the 90-day investment horizon ChampionX is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, ChampionX is 1.6 times less risky than BW LPG. The stock trades about -0.02 of its potential returns per unit of risk. The BW LPG Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,304  in BW LPG Limited on November 19, 2024 and sell it today you would lose (37.00) from holding BW LPG Limited or give up 2.84% of portfolio value over 90 days.

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

ChampionX  vs.  BW LPG Limited

ChampionX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ChampionX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, ChampionX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BW LPG Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, BW LPG is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ChampionX and BW LPG

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

The idea behind ChampionX and BW LPG Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.