Correlation Between Fukuyama Transporting and BW OFFSHORE

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

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

Diversification Opportunities for Fukuyama Transporting and BW OFFSHORE

-0.15

Correlation Coefficient

Fukuyama Transporting  BW OFFSHORE

Good diversification

The 3 months correlation between Fukuyama and XY81 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fukuyama Transporting Co 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 Fukuyama Transporting 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 Fukuyama Transporting Co 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 Fukuyama Transporting i.e., Fukuyama Transporting and BW OFFSHORE go up and down completely randomly.

Pair Corralation between Fukuyama Transporting and BW OFFSHORE

Assuming the 90 days horizon Fukuyama Transporting Co is expected to generate 0.86 times more return on investment than BW OFFSHORE. However, Fukuyama Transporting Co is 1.16 times less risky than BW OFFSHORE. It trades about 0.04 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.03 per unit of risk. If you would invest  1,766  in Fukuyama Transporting Co on September 4, 2024 and sell it today you would earn a total of  574.00  from holding Fukuyama Transporting Co or generate 32.5% return on investment over 90 days.

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

Fukuyama Transporting Co  vs.  BW OFFSHORE LTD

Fukuyama Transporting

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fukuyama Transporting Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fukuyama Transporting is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BW OFFSHORE LTD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fukuyama Transporting and BW OFFSHORE

The main advantage of trading using opposite Fukuyama Transporting and BW OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fukuyama Transporting 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 Fukuyama Transporting Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.