Correlation Between BW OFFSHORE and Highlight Communications

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

Diversification Opportunities for BW OFFSHORE and Highlight Communications

-0.71

Correlation Coefficient

BW OFFSHORE  Highlight Communications

Pay attention - limited upside

The 3 months correlation between XY81 and Highlight is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications 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 Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and Highlight Communications go up and down completely randomly.

Pair Corralation between BW OFFSHORE and Highlight Communications

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 0.77 times more return on investment than Highlight Communications. However, BW OFFSHORE LTD is 1.29 times less risky than Highlight Communications. It trades about 0.08 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.09 per unit of risk. If you would invest  162.00  in BW OFFSHORE LTD on October 5, 2024 and sell it today you would earn a total of  84.00  from holding BW OFFSHORE LTD or generate 51.85% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  Highlight Communications AG

BW OFFSHORE LTD

Risk-Adjusted Performance

0 of 100

Very 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Highlight Communications

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW OFFSHORE and Highlight Communications

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

The idea behind BW OFFSHORE LTD and Highlight Communications AG 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 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.