Correlation Between BW OFFSHORE and ECHO INVESTMENT

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

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

Diversification Opportunities for BW OFFSHORE and ECHO INVESTMENT

0.47

Correlation Coefficient

BW OFFSHORE  ECHO INVESTMENT

Very weak diversification

The 3 months correlation between XY81 and ECHO is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and BW 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 BW OFFSHORE LTD are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between BW OFFSHORE and ECHO INVESTMENT

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 1.45 times more return on investment than ECHO INVESTMENT. However, BW OFFSHORE is 1.45 times more volatile than ECHO INVESTMENT ZY. It trades about 0.07 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.07 per unit of risk. If you would invest  209.00  in BW OFFSHORE LTD on September 12, 2024 and sell it today you would earn a total of  24.00  from holding BW OFFSHORE LTD or generate 11.48% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  ECHO INVESTMENT ZY

BW OFFSHORE LTD

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BW OFFSHORE and ECHO INVESTMENT

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

The idea behind BW OFFSHORE LTD and ECHO INVESTMENT ZY 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.