Correlation Between BW OFFSHORE and SWISS WATER

Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE and SWISS WATER 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 SWISS WATER 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 SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on BW OFFSHORE and SWISS WATER 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 SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and SWISS WATER.

Diversification Opportunities for BW OFFSHORE and SWISS WATER

-0.42

Correlation Coefficient

BW OFFSHORE  SWISS WATER

Very good diversification

The 3 months correlation between XY81 and SWISS is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and SWISS WATER go up and down completely randomly.

Pair Corralation between BW OFFSHORE and SWISS WATER

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 0.89 times more return on investment than SWISS WATER. However, BW OFFSHORE LTD is 1.13 times less risky than SWISS WATER. It trades about 0.01 of its potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about -0.06 per unit of risk. If you would invest  253.00  in BW OFFSHORE LTD on October 26, 2024 and sell it today you would lose (2.00) from holding BW OFFSHORE LTD or give up 0.79% of portfolio value over 90 days.

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

BW OFFSHORE LTD  vs.  SWISS WATER DECAFFCOFFEE

BW OFFSHORE LTD

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days BW OFFSHORE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BW OFFSHORE and SWISS WATER

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

The idea behind BW OFFSHORE LTD and SWISS WATER DECAFFCOFFEE 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.