Correlation Between Sable Offshore and BW Offshore

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

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

Diversification Opportunities for Sable Offshore and BW Offshore

-0.19

Correlation Coefficient

Sable Offshore  BW Offshore

Good diversification

The 3 months correlation between Sable and BWOFY is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Sable Offshore 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 Sable Offshore Corp 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 Limited has no effect on the direction of Sable Offshore i.e., Sable Offshore and BW Offshore go up and down completely randomly.

Pair Corralation between Sable Offshore and BW Offshore

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 1.73 times more return on investment than BW Offshore. However, Sable Offshore is 1.73 times more volatile than BW Offshore Limited. It trades about 0.23 of its potential returns per unit of risk. BW Offshore Limited is currently generating about -0.24 per unit of risk. If you would invest  2,379  in Sable Offshore Corp on October 26, 2024 and sell it today you would earn a total of  404.00  from holding Sable Offshore Corp or generate 16.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Sable Offshore Corp  vs.  BW Offshore Limited

Sable Offshore Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sable Offshore Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Sable Offshore exhibited solid returns over the last few months and may actually be approaching a breakup point.

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sable Offshore and BW Offshore

The main advantage of trading using opposite Sable Offshore and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sable Offshore 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 Sable Offshore Corp and BW Offshore 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.