Correlation Between BW OFFSHORE and CarMax

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

Diversification Opportunities for BW OFFSHORE and CarMax

-0.68

Correlation Coefficient

BW OFFSHORE  CarMax

Excellent diversification

The 3 months correlation between XY81 and CarMax is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and CarMax go up and down completely randomly.

Pair Corralation between BW OFFSHORE and CarMax

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 1.07 times more return on investment than CarMax. However, BW OFFSHORE is 1.07 times more volatile than CarMax Inc. It trades about 0.05 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.02 per unit of risk. If you would invest  187.00  in BW OFFSHORE LTD on October 4, 2024 and sell it today you would earn a total of  59.00  from holding BW OFFSHORE LTD or generate 31.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

BW OFFSHORE LTD  vs.  CarMax Inc

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.

CarMax Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CarMax reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW OFFSHORE and CarMax

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

The idea behind BW OFFSHORE LTD and CarMax Inc 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.