Correlation Between Zegona Communications and BW Offshore

Can any of the company-specific risk be diversified away by investing in both Zegona Communications and BW Offshore 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 Zegona Communications and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zegona Communications Plc and BW Offshore, you can compare the effects of market volatilities on Zegona Communications and BW Offshore 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 Zegona Communications with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and BW Offshore.

Diversification Opportunities for Zegona Communications and BW Offshore

0.43

Correlation Coefficient

Zegona Communications  BW Offshore

Very weak diversification

The 3 months correlation between Zegona and 0RKH is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Zegona Communications i.e., Zegona Communications and BW Offshore go up and down completely randomly.

Pair Corralation between Zegona Communications and BW Offshore

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.41 times more return on investment than BW Offshore. However, Zegona Communications is 1.41 times more volatile than BW Offshore. It trades about 0.12 of its potential returns per unit of risk. BW Offshore is currently generating about 0.0 per unit of risk. If you would invest  32,800  in Zegona Communications Plc on October 25, 2024 and sell it today you would earn a total of  7,800  from holding Zegona Communications Plc or generate 23.78% return on investment over 90 days.

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

Zegona Communications Plc  vs.  BW Offshore

Zegona Communications Plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

BW Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zegona Communications and BW Offshore

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

The idea behind Zegona Communications Plc and BW Offshore 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.