Correlation Between Golden Ocean and BW LPG

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

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

Diversification Opportunities for Golden Ocean and BW LPG

0.68

Correlation Coefficient

Golden Ocean  BW LPG

Poor diversification

The 3 months correlation between Golden and BWLPG is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Golden Ocean Group and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG and Golden Ocean 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 Golden Ocean Group 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 has no effect on the direction of Golden Ocean i.e., Golden Ocean and BW LPG go up and down completely randomly.

Pair Corralation between Golden Ocean and BW LPG

Assuming the 90 days trading horizon Golden Ocean Group is expected to under-perform the BW LPG. In addition to that, Golden Ocean is 1.12 times more volatile than BW LPG. It trades about -0.08 of its total potential returns per unit of risk. BW LPG is currently generating about -0.05 per unit of volatility. If you would invest  12,864  in BW LPG on December 31, 2024 and sell it today you would lose (1,214) from holding BW LPG or give up 9.44% of portfolio value over 90 days.

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

Golden Ocean Group  vs.  BW LPG

Golden Ocean Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Ocean Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BW LPG

Risk-Adjusted Performance

Very Weak

Over the last 90 days BW LPG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Golden Ocean and BW LPG

The main advantage of trading using opposite Golden Ocean and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Ocean 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 Golden Ocean Group and BW LPG 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.