Correlation Between BW OFFSHORE and CARSALES

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

Diversification Opportunities for BW OFFSHORE and CARSALES

-0.26

Correlation Coefficient

BW OFFSHORE  CARSALES

Very good diversification

The 3 months correlation between XY81 and CARSALES is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and CARSALES go up and down completely randomly.

Pair Corralation between BW OFFSHORE and CARSALES

Assuming the 90 days trading horizon BW OFFSHORE is expected to generate 1.37 times less return on investment than CARSALES. In addition to that, BW OFFSHORE is 1.48 times more volatile than CARSALESCOM. It trades about 0.03 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.07 per unit of volatility. If you would invest  1,329  in CARSALESCOM on October 4, 2024 and sell it today you would earn a total of  851.00  from holding CARSALESCOM or generate 64.03% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  CARSALESCOM

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

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALES 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 CARSALES

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

The idea behind BW OFFSHORE LTD and CARSALESCOM 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.