Correlation Between Global E and BW Offshore

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

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

Diversification Opportunities for Global E and BW Offshore

0.69

Correlation Coefficient

Global E  BW Offshore

Poor diversification

The 3 months correlation between Global and BWOFY is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Global E 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 Global E Online 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 Limited has no effect on the direction of Global E i.e., Global E and BW Offshore go up and down completely randomly.

Pair Corralation between Global E and BW Offshore

Given the investment horizon of 90 days Global E Online is expected to generate 1.73 times more return on investment than BW Offshore. However, Global E is 1.73 times more volatile than BW Offshore Limited. It trades about 0.06 of its potential returns per unit of risk. BW Offshore Limited is currently generating about 0.07 per unit of risk. If you would invest  3,868  in Global E Online on October 9, 2024 and sell it today you would earn a total of  1,387  from holding Global E Online or generate 35.86% return on investment over 90 days.

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

Global E Online  vs.  BW Offshore Limited

Global E Online

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

BW Offshore Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global E and BW Offshore

The main advantage of trading using opposite Global E and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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 Global E Online and BW Offshore 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.