Correlation Between BW LPG and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both BW LPG and Solstad 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 BW LPG and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG Limited and Solstad Offshore ASA, you can compare the effects of market volatilities on BW LPG and Solstad 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 BW LPG with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Solstad Offshore.
Diversification Opportunities for BW LPG and Solstad Offshore
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BW9 and Solstad is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG Limited and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and BW LPG 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 BW LPG Limited are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of BW LPG i.e., BW LPG and Solstad Offshore go up and down completely randomly.
Pair Corralation between BW LPG and Solstad Offshore
Assuming the 90 days horizon BW LPG Limited is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, BW LPG Limited is 2.16 times less risky than Solstad Offshore. The stock trades about -0.13 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 266.00 in Solstad Offshore ASA on September 12, 2024 and sell it today you would earn a total of 61.00 from holding Solstad Offshore ASA or generate 22.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BW LPG Limited vs. Solstad Offshore ASA
Performance |
| Timeline |
| BW LPG Limited |
| Solstad Offshore ASA |
BW LPG and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Solstad Offshore
The main advantage of trading using opposite BW LPG and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Solstad 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.| BW LPG vs. KENEDIX OFFICE INV | BW LPG vs. 24SEVENOFFICE GROUP AB | BW LPG vs. PT Indofood Sukses | BW LPG vs. ASSOC BR FOODS |
| Solstad Offshore vs. Columbia Sportswear | Solstad Offshore vs. PARKEN Sport Entertainment | Solstad Offshore vs. Sunny Optical Technology | Solstad Offshore vs. Micron Technology |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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