Correlation Between BW OFFSHORE and Bannerman Resources

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

Diversification Opportunities for BW OFFSHORE and Bannerman Resources

0.69

Correlation Coefficient

BW OFFSHORE  Bannerman Resources

Poor diversification

The 3 months correlation between XY81 and Bannerman is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources 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 Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and Bannerman Resources go up and down completely randomly.

Pair Corralation between BW OFFSHORE and Bannerman Resources

Assuming the 90 days trading horizon BW OFFSHORE is expected to generate 2.92 times less return on investment than Bannerman Resources. But when comparing it to its historical volatility, BW OFFSHORE LTD is 1.29 times less risky than Bannerman Resources. It trades about 0.02 of its potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  199.00  in Bannerman Resources Limited on October 10, 2024 and sell it today you would earn a total of  16.00  from holding Bannerman Resources Limited or generate 8.04% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  Bannerman Resources Limited

BW OFFSHORE LTD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bannerman Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bannerman Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BW OFFSHORE and Bannerman Resources

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

The idea behind BW OFFSHORE LTD and Bannerman Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.