Correlation Between EIDESVIK OFFSHORE and BW OFFSHORE

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

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

Diversification Opportunities for EIDESVIK OFFSHORE and BW OFFSHORE

-0.16

Correlation Coefficient

EIDESVIK OFFSHORE  BW OFFSHORE

Good diversification

The 3 months correlation between EIDESVIK and XY81 is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD and EIDESVIK 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 EIDESVIK OFFSHORE NK are associated (or correlated) with BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and BW OFFSHORE go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and BW OFFSHORE

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to under-perform the BW OFFSHORE. But the stock apears to be less risky and, when comparing its historical volatility, EIDESVIK OFFSHORE NK is 1.23 times less risky than BW OFFSHORE. The stock trades about -0.06 of its potential returns per unit of risk. The BW OFFSHORE LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  209.00  in BW OFFSHORE LTD on September 12, 2024 and sell it today you would earn a total of  24.00  from holding BW OFFSHORE LTD or generate 11.48% return on investment over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  BW OFFSHORE LTD

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BW OFFSHORE LTD

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EIDESVIK OFFSHORE and BW OFFSHORE

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

The idea behind EIDESVIK OFFSHORE NK and BW OFFSHORE LTD 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.