Correlation Between Awilco LNG and BW Energy
Can any of the company-specific risk be diversified away by investing in both Awilco LNG and BW Energy 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 Awilco LNG and BW Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Awilco LNG ASA and BW Energy, you can compare the effects of market volatilities on Awilco LNG and BW Energy 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 Awilco LNG with a short position of BW Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco LNG and BW Energy.
Diversification Opportunities for Awilco LNG and BW Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Awilco and BWE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Awilco LNG ASA and BW Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Energy and Awilco LNG 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 Awilco LNG ASA are associated (or correlated) with BW Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Energy has no effect on the direction of Awilco LNG i.e., Awilco LNG and BW Energy go up and down completely randomly.
Pair Corralation between Awilco LNG and BW Energy
Assuming the 90 days trading horizon Awilco LNG ASA is expected to under-perform the BW Energy. In addition to that, Awilco LNG is 1.1 times more volatile than BW Energy. It trades about -0.01 of its total potential returns per unit of risk. BW Energy is currently generating about 0.0 per unit of volatility. If you would invest 2,518 in BW Energy on September 4, 2024 and sell it today you would lose (263.00) from holding BW Energy or give up 10.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Awilco LNG ASA vs. BW Energy
Performance |
| Timeline |
| Awilco LNG ASA |
| BW Energy |
Awilco LNG and BW Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Awilco LNG and BW Energy
The main advantage of trading using opposite Awilco LNG and BW Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awilco LNG position performs unexpectedly, BW Energy 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 Energy will offset losses from the drop in BW Energy's long position.The idea behind Awilco LNG ASA and BW Energy 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.| BW Energy vs. BW Offshore | BW Energy vs. Panoro Energy ASA | BW Energy vs. Aker BP ASA | BW Energy vs. BW LPG |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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