Correlation Between Tapestry and BW LPG

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

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

Diversification Opportunities for Tapestry and BW LPG

-0.81

Correlation Coefficient

Tapestry  BW LPG

Pay attention - limited upside

The 3 months correlation between Tapestry and BWLP is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry 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 Tapestry 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 Tapestry 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 Tapestry i.e., Tapestry and BW LPG go up and down completely randomly.

Pair Corralation between Tapestry and BW LPG

Considering the 90-day investment horizon Tapestry is expected to generate 1.86 times less return on investment than BW LPG. But when comparing it to its historical volatility, Tapestry is 1.53 times less risky than BW LPG. It trades about 0.06 of its potential returns per unit of risk. BW LPG Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  460.00  in BW LPG Limited on October 11, 2024 and sell it today you would earn a total of  679.00  from holding BW LPG Limited or generate 147.61% return on investment over 90 days.

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

Tapestry  vs.  BW LPG Limited

Tapestry

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

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. Even with inconsistent performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Tapestry and BW LPG

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