Correlation Between Global Opportunities and BW Offshore

Can any of the company-specific risk be diversified away by investing in both Global Opportunities 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 Opportunities 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 Opportunities Trust and BW Offshore, you can compare the effects of market volatilities on Global Opportunities 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 Opportunities with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Opportunities and BW Offshore.

Diversification Opportunities for Global Opportunities and BW Offshore

0.1

Correlation Coefficient

Global Opportunities  BW Offshore

Average diversification

The 3 months correlation between Global and 0RKH is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunities Trust and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Global Opportunities 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 Opportunities Trust 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 has no effect on the direction of Global Opportunities i.e., Global Opportunities and BW Offshore go up and down completely randomly.

Pair Corralation between Global Opportunities and BW Offshore

Assuming the 90 days trading horizon Global Opportunities Trust is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Global Opportunities Trust is 1.8 times less risky than BW Offshore. The stock trades about 0.0 of its potential returns per unit of risk. The BW Offshore is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,160  in BW Offshore on October 7, 2024 and sell it today you would earn a total of  13.00  from holding BW Offshore or generate 0.41% return on investment over 90 days.

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

Global Opportunities Trust  vs.  BW Offshore

Global Opportunities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Opportunities Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Global Opportunities is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BW Offshore

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Global Opportunities and BW Offshore

The main advantage of trading using opposite Global Opportunities and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Opportunities 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 Opportunities Trust and BW Offshore 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.