Correlation Between ZIM Integrated and BW LPG

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

By analyzing existing cross correlation between ZIM Integrated Shipping and BW LPG Limited, you can compare the effects of market volatilities on ZIM Integrated and BW LPG 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 ZIM Integrated with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZIM Integrated and BW LPG.

Diversification Opportunities for ZIM Integrated and BW LPG

0.51

Correlation Coefficient

ZIM Integrated  BW LPG

Very weak diversification

The 3 months correlation between ZIM and BWLLF is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ZIM Integrated Shipping and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and ZIM Integrated 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 ZIM Integrated Shipping are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of ZIM Integrated i.e., ZIM Integrated and BW LPG go up and down completely randomly.

Pair Corralation between ZIM Integrated and BW LPG

Considering the 90-day investment horizon ZIM Integrated is expected to generate 3.31 times less return on investment than BW LPG. But when comparing it to its historical volatility, ZIM Integrated Shipping is 2.26 times less risky than BW LPG. It trades about 0.06 of its potential returns per unit of risk. BW LPG Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  528.00  in BW LPG Limited on October 10, 2024 and sell it today you would earn a total of  1,313  from holding BW LPG Limited or generate 248.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.92%
Values	Daily Returns

ZIM Integrated Shipping  vs.  BW LPG Limited

ZIM Integrated Shipping

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZIM Integrated Shipping are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward indicators, ZIM Integrated displayed solid returns over the last few months and may actually be approaching a breakup point.

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ZIM Integrated and BW LPG

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

The idea behind ZIM Integrated Shipping and BW LPG Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.