Correlation Between Belships and BW LPG
Can any of the company-specific risk be diversified away by investing in both Belships 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 Belships and BW LPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Belships and BW LPG, you can compare the effects of market volatilities on Belships 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 Belships with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belships and BW LPG.
Diversification Opportunities for Belships and BW LPG
Poor diversification
The 3 months correlation between Belships and BWLPG is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Belships and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG and Belships 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 Belships 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 Belships i.e., Belships and BW LPG go up and down completely randomly.
Pair Corralation between Belships and BW LPG
Assuming the 90 days trading horizon Belships is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, Belships is 1.05 times less risky than BW LPG. The stock trades about -0.04 of its potential returns per unit of risk. The BW LPG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 14,570 in BW LPG on August 29, 2024 and sell it today you would lose (70.00) from holding BW LPG or give up 0.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Belships vs. BW LPG
Performance |
| Timeline |
| Belships |
| BW LPG |
Belships and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Belships and BW LPG
The main advantage of trading using opposite Belships and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belships 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.| Belships vs. Shelf Drilling | Belships vs. Solstad Offsho | Belships vs. Eidesvik Offshore ASA | Belships vs. Elkem ASA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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