Correlation Between Mitsui OSK and BW LPG

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

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

Diversification Opportunities for Mitsui OSK and BW LPG

0.47

Correlation Coefficient

Mitsui OSK  BW LPG

Very weak diversification

The 3 months correlation between Mitsui and BWLLF is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui OSK Lines 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 Mitsui OSK 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 Mitsui OSK Lines 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 Mitsui OSK i.e., Mitsui OSK and BW LPG go up and down completely randomly.

Pair Corralation between Mitsui OSK and BW LPG

Assuming the 90 days horizon Mitsui OSK is expected to generate 8.37 times less return on investment than BW LPG. But when comparing it to its historical volatility, Mitsui OSK Lines is 5.02 times less risky than BW LPG. It trades about 0.05 of its potential returns per unit of risk. BW LPG Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  528.00  in BW LPG Limited on October 9, 2024 and sell it today you would earn a total of  1,313  from holding BW LPG Limited or generate 248.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.12%
Values	Daily Returns

Mitsui OSK Lines  vs.  BW LPG Limited

Mitsui OSK Lines

Risk-Adjusted Performance

8 of 100

OK

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

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mitsui OSK and BW LPG

The main advantage of trading using opposite Mitsui OSK and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui OSK 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 Mitsui OSK Lines 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.