Correlation Between Western Bulk and Techstep ASA

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

By analyzing existing cross correlation between Western Bulk Chartering and Techstep ASA, you can compare the effects of market volatilities on Western Bulk and Techstep ASA 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 Western Bulk with a short position of Techstep ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Bulk and Techstep ASA.

Diversification Opportunities for Western Bulk and Techstep ASA

-0.53

Correlation Coefficient

Western Bulk  Techstep ASA

Excellent diversification

The 3 months correlation between Western and Techstep is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and Techstep ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techstep ASA and Western Bulk 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 Western Bulk Chartering are associated (or correlated) with Techstep ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techstep ASA has no effect on the direction of Western Bulk i.e., Western Bulk and Techstep ASA go up and down completely randomly.

Pair Corralation between Western Bulk and Techstep ASA

Assuming the 90 days trading horizon Western Bulk Chartering is expected to under-perform the Techstep ASA. But the stock apears to be less risky and, when comparing its historical volatility, Western Bulk Chartering is 1.23 times less risky than Techstep ASA. The stock trades about -0.17 of its potential returns per unit of risk. The Techstep ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,180  in Techstep ASA on September 5, 2024 and sell it today you would earn a total of  25.00  from holding Techstep ASA or generate 2.12% return on investment over 90 days.

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

Western Bulk Chartering  vs.  Techstep ASA

Western Bulk Chartering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Bulk Chartering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Techstep ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Techstep ASA is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Western Bulk and Techstep ASA

The main advantage of trading using opposite Western Bulk and Techstep ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Bulk position performs unexpectedly, Techstep ASA 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 Techstep ASA will offset losses from the drop in Techstep ASA's long position.

The idea behind Western Bulk Chartering and Techstep ASA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.