Correlation Between Balfour Beatty and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Balfour Beatty 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 Balfour Beatty and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balfour Beatty plc and BW Offshore, you can compare the effects of market volatilities on Balfour Beatty 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 Balfour Beatty with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balfour Beatty and BW Offshore.
Diversification Opportunities for Balfour Beatty and BW Offshore
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Balfour and 0RKH is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Balfour Beatty 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 Balfour Beatty 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 Balfour Beatty i.e., Balfour Beatty and BW Offshore go up and down completely randomly.
Pair Corralation between Balfour Beatty and BW Offshore
Assuming the 90 days trading horizon Balfour Beatty is expected to generate 11.12 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Balfour Beatty plc is 1.93 times less risky than BW Offshore. It trades about 0.07 of its potential returns per unit of risk. BW Offshore is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 2,745 in BW Offshore on October 9, 2024 and sell it today you would earn a total of 393.00 from holding BW Offshore or generate 14.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balfour Beatty plc vs. BW Offshore
Performance |
| Timeline |
| Balfour Beatty plc |
| BW Offshore |
Balfour Beatty and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balfour Beatty and BW Offshore
The main advantage of trading using opposite Balfour Beatty and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balfour Beatty 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.| Balfour Beatty vs. Synthomer plc | Balfour Beatty vs. Infrastrutture Wireless Italiane | Balfour Beatty vs. alstria office REIT AG | Balfour Beatty vs. Electronic Arts |
| BW Offshore vs. alstria office REIT AG | BW Offshore vs. Monks Investment Trust | BW Offshore vs. New Residential Investment | BW Offshore vs. Mineral Financial Investments |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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