Correlation Between Costamare and BW LPG

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

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

Diversification Opportunities for Costamare and BW LPG

-0.26

Correlation Coefficient

Costamare  BW LPG

Very good diversification

The 3 months correlation between Costamare and BWLP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Costamare 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 Costamare 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 Costamare 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 Costamare i.e., Costamare and BW LPG go up and down completely randomly.

Pair Corralation between Costamare and BW LPG

Assuming the 90 days trading horizon Costamare is expected to generate 0.23 times more return on investment than BW LPG. However, Costamare is 4.37 times less risky than BW LPG. It trades about -0.03 of its potential returns per unit of risk. BW LPG Limited is currently generating about -0.12 per unit of risk. If you would invest  2,607  in Costamare on August 30, 2024 and sell it today you would lose (34.00) from holding Costamare or give up 1.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Costamare  vs.  BW LPG Limited

Costamare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Costamare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Costamare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BW LPG Limited

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Costamare and BW LPG

The main advantage of trading using opposite Costamare and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costamare 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 Costamare 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.