Correlation Between Dno ASA and BW Energy

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

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

Diversification Opportunities for Dno ASA and BW Energy

0.67

Correlation Coefficient

Dno ASA  BW Energy

Poor diversification

The 3 months correlation between Dno and BWE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dno ASA and BW Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Energy and Dno ASA 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 Dno ASA are associated (or correlated) with BW Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Energy has no effect on the direction of Dno ASA i.e., Dno ASA and BW Energy go up and down completely randomly.

Pair Corralation between Dno ASA and BW Energy

Assuming the 90 days trading horizon Dno ASA is expected to generate 0.97 times more return on investment than BW Energy. However, Dno ASA is 1.03 times less risky than BW Energy. It trades about -0.07 of its potential returns per unit of risk. BW Energy is currently generating about -0.11 per unit of risk. If you would invest  1,143  in Dno ASA on August 31, 2024 and sell it today you would lose (128.00) from holding Dno ASA or give up 11.2% of portfolio value over 90 days.

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

Dno ASA  vs.  BW Energy

Dno ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dno ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

BW Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dno ASA and BW Energy

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

The idea behind Dno ASA and BW Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.