Correlation Between Genco Shipping and BW LPG

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

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

Diversification Opportunities for Genco Shipping and BW LPG

0.68

Correlation Coefficient

Genco Shipping  BW LPG

Poor diversification

The 3 months correlation between Genco and BW9 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading 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 Genco Shipping 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 Genco Shipping Trading 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 Genco Shipping i.e., Genco Shipping and BW LPG go up and down completely randomly.

Pair Corralation between Genco Shipping and BW LPG

Assuming the 90 days trading horizon Genco Shipping Trading is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, Genco Shipping Trading is 1.47 times less risky than BW LPG. The stock trades about 0.0 of its potential returns per unit of risk. The BW LPG Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,007  in BW LPG Limited on December 25, 2024 and sell it today you would earn a total of  80.00  from holding BW LPG Limited or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Genco Shipping Trading  vs.  BW LPG Limited

Genco Shipping Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genco Shipping is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BW LPG Limited

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Genco Shipping and BW LPG

The main advantage of trading using opposite Genco Shipping and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genco Shipping 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 Genco Shipping Trading 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.