Correlation Between BW LPG and 2020 Bulkers
Can any of the company-specific risk be diversified away by investing in both BW LPG and 2020 Bulkers 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 2020 Bulkers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and 2020 Bulkers, you can compare the effects of market volatilities on BW LPG and 2020 Bulkers 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 2020 Bulkers. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and 2020 Bulkers.
Diversification Opportunities for BW LPG and 2020 Bulkers
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BWLPG and 2020 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and 2020 Bulkers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2020 Bulkers 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 are associated (or correlated) with 2020 Bulkers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2020 Bulkers has no effect on the direction of BW LPG i.e., BW LPG and 2020 Bulkers go up and down completely randomly.
Pair Corralation between BW LPG and 2020 Bulkers
Assuming the 90 days trading horizon BW LPG is expected to generate 224.0 times less return on investment than 2020 Bulkers. But when comparing it to its historical volatility, BW LPG is 1.12 times less risky than 2020 Bulkers. It trades about 0.0 of its potential returns per unit of risk. 2020 Bulkers is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 13,037 in 2020 Bulkers on August 28, 2024 and sell it today you would earn a total of 243.00 from holding 2020 Bulkers or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW LPG vs. 2020 Bulkers
Performance |
| Timeline |
| BW LPG |
| 2020 Bulkers |
BW LPG and 2020 Bulkers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and 2020 Bulkers
The main advantage of trading using opposite BW LPG and 2020 Bulkers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, 2020 Bulkers 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 2020 Bulkers will offset losses from the drop in 2020 Bulkers' long position.The idea behind BW LPG and 2020 Bulkers 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.| 2020 Bulkers vs. Shelf Drilling | 2020 Bulkers vs. Solstad Offsho | 2020 Bulkers vs. Eidesvik Offshore ASA | 2020 Bulkers 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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