Correlation Between Awilco LNG and BW LPG
Can any of the company-specific risk be diversified away by investing in both Awilco LNG 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 Awilco LNG and BW LPG 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 LPG, you can compare the effects of market volatilities on Awilco LNG 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 Awilco LNG with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco LNG and BW LPG.
Diversification Opportunities for Awilco LNG and BW LPG
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Awilco and BWLPG is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Awilco LNG ASA and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG 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 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 has no effect on the direction of Awilco LNG i.e., Awilco LNG and BW LPG go up and down completely randomly.
Pair Corralation between Awilco LNG and BW LPG
Assuming the 90 days trading horizon Awilco LNG ASA is expected to under-perform the BW LPG. In addition to that, Awilco LNG is 2.99 times more volatile than BW LPG. It trades about -0.18 of its total potential returns per unit of risk. BW LPG is currently generating about -0.1 per unit of volatility. If you would invest 14,150 in BW LPG on September 1, 2024 and sell it today you would lose (760.00) from holding BW LPG or give up 5.37% 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 LPG
Performance |
| Timeline |
| Awilco LNG ASA |
| BW LPG |
Awilco LNG and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Awilco LNG and BW LPG
The main advantage of trading using opposite Awilco LNG and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awilco LNG 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 Awilco LNG ASA and BW LPG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Global Correlations Find global opportunities by holding instruments from different markets |