Correlation Between NOVANT and BW Offshore

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

By analyzing existing cross correlation between NOVANT 2637 01 NOV 36 and BW Offshore Limited, you can compare the effects of market volatilities on NOVANT 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 NOVANT with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVANT and BW Offshore.

Diversification Opportunities for NOVANT and BW Offshore

0.29

Correlation Coefficient

NOVANT  BW Offshore

Modest diversification

The 3 months correlation between NOVANT and BWOFY is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NOVANT 2637 01 NOV 36 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 NOVANT 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 NOVANT 2637 01 NOV 36 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 NOVANT i.e., NOVANT and BW Offshore go up and down completely randomly.

Pair Corralation between NOVANT and BW Offshore

Assuming the 90 days trading horizon NOVANT 2637 01 NOV 36 is expected to generate 0.97 times more return on investment than BW Offshore. However, NOVANT 2637 01 NOV 36 is 1.04 times less risky than BW Offshore. It trades about -0.01 of its potential returns per unit of risk. BW Offshore Limited is currently generating about -0.04 per unit of risk. If you would invest  7,678  in NOVANT 2637 01 NOV 36 on December 22, 2024 and sell it today you would lose (43.00) from holding NOVANT 2637 01 NOV 36 or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	36.67%
Values	Daily Returns

NOVANT 2637 01 NOV 36  vs.  BW Offshore Limited

NOVANT 2637 01

Risk-Adjusted Performance

Very Weak

Over the last 90 days NOVANT 2637 01 NOV 36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVANT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BW Offshore Limited

Risk-Adjusted Performance

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 fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NOVANT and BW Offshore

The main advantage of trading using opposite NOVANT and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOVANT 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 NOVANT 2637 01 NOV 36 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.