Correlation Between LOANDEPOT INC and BW OFFSHORE

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

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

Diversification Opportunities for LOANDEPOT INC and BW OFFSHORE

-0.52

Correlation Coefficient

LOANDEPOT INC  BW OFFSHORE

Excellent diversification

The 3 months correlation between LOANDEPOT and XY81 is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding LOANDEPOT INC A 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 LOANDEPOT INC 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 LOANDEPOT INC A 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 LOANDEPOT INC i.e., LOANDEPOT INC and BW OFFSHORE go up and down completely randomly.

Pair Corralation between LOANDEPOT INC and BW OFFSHORE

Assuming the 90 days horizon LOANDEPOT INC A is expected to generate 2.0 times more return on investment than BW OFFSHORE. However, LOANDEPOT INC is 2.0 times more volatile than BW OFFSHORE LTD. It trades about 0.03 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.04 per unit of risk. If you would invest  174.00  in LOANDEPOT INC A on September 19, 2024 and sell it today you would earn a total of  25.00  from holding LOANDEPOT INC A or generate 14.37% return on investment over 90 days.

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

LOANDEPOT INC A  vs.  BW OFFSHORE LTD

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BW OFFSHORE LTD

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LOANDEPOT INC and BW OFFSHORE

The main advantage of trading using opposite LOANDEPOT INC and BW OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOANDEPOT INC 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 LOANDEPOT INC A 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.