Correlation Between BW OFFSHORE and SEKISUI CHEMICAL

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

Diversification Opportunities for BW OFFSHORE and SEKISUI CHEMICAL

-0.4

Correlation Coefficient

BW OFFSHORE  SEKISUI CHEMICAL

Very good diversification

The 3 months correlation between XY81 and SEKISUI is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and SEKISUI CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEKISUI CHEMICAL 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 SEKISUI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEKISUI CHEMICAL has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and SEKISUI CHEMICAL go up and down completely randomly.

Pair Corralation between BW OFFSHORE and SEKISUI CHEMICAL

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 1.7 times more return on investment than SEKISUI CHEMICAL. However, BW OFFSHORE is 1.7 times more volatile than SEKISUI CHEMICAL. It trades about 0.03 of its potential returns per unit of risk. SEKISUI CHEMICAL is currently generating about 0.02 per unit of risk. If you would invest  188.00  in BW OFFSHORE LTD on September 18, 2024 and sell it today you would earn a total of  45.00  from holding BW OFFSHORE LTD or generate 23.94% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  SEKISUI CHEMICAL

BW OFFSHORE LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SEKISUI CHEMICAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, SEKISUI CHEMICAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BW OFFSHORE and SEKISUI CHEMICAL

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

The idea behind BW OFFSHORE LTD and SEKISUI CHEMICAL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..