Correlation Between BW LPG and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both BW LPG and Arm Holdings 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 Arm Holdings 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 Arm Holdings plc, you can compare the effects of market volatilities on BW LPG and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Arm Holdings.
Diversification Opportunities for BW LPG and Arm Holdings
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BWLP and Arm is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG Limited and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of BW LPG i.e., BW LPG and Arm Holdings go up and down completely randomly.
Pair Corralation between BW LPG and Arm Holdings
Given the investment horizon of 90 days BW LPG is expected to generate 1.97 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, BW LPG Limited is 1.54 times less risky than Arm Holdings. It trades about 0.06 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on September 14, 2024 and sell it today you would earn a total of 8,441 from holding Arm Holdings plc or generate 132.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.64% |
| Values | Daily Returns |
BW LPG Limited vs. Arm Holdings plc
Performance |
| Timeline |
| BW LPG Limited |
| Arm Holdings plc |
BW LPG and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Arm Holdings
The main advantage of trading using opposite BW LPG and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| BW LPG vs. Arm Holdings plc | BW LPG vs. Valens | BW LPG vs. Elmos Semiconductor SE | BW LPG vs. Western Copper and |
| Arm Holdings vs. ON Semiconductor | Arm Holdings vs. Globalfoundries | Arm Holdings vs. Wisekey International Holding | Arm Holdings vs. Nano Labs |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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