Correlation Between BW OFFSHORE and LPKF Laser

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

Diversification Opportunities for BW OFFSHORE and LPKF Laser

0.48

Correlation Coefficient

BW OFFSHORE  LPKF Laser

Very weak diversification

The 3 months correlation between XY81 and LPKF is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and LPKF Laser Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPKF Laser Electronics 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 LPKF Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPKF Laser Electronics has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and LPKF Laser go up and down completely randomly.

Pair Corralation between BW OFFSHORE and LPKF Laser

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to under-perform the LPKF Laser. But the stock apears to be less risky and, when comparing its historical volatility, BW OFFSHORE LTD is 2.13 times less risky than LPKF Laser. The stock trades about -0.05 of its potential returns per unit of risk. The LPKF Laser Electronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  838.00  in LPKF Laser Electronics on September 21, 2024 and sell it today you would earn a total of  26.00  from holding LPKF Laser Electronics or generate 3.1% 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.  LPKF Laser Electronics

BW OFFSHORE LTD

Risk-Adjusted Performance

1 of 100

Very 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.

LPKF Laser Electronics

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with BW OFFSHORE and LPKF Laser

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

The idea behind BW OFFSHORE LTD and LPKF Laser Electronics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.