Correlation Between BW LPG and Electromagnetic Geoservices
Can any of the company-specific risk be diversified away by investing in both BW LPG and Electromagnetic Geoservices 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 Electromagnetic Geoservices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and Electromagnetic Geoservices ASA, you can compare the effects of market volatilities on BW LPG and Electromagnetic Geoservices 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 Electromagnetic Geoservices. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Electromagnetic Geoservices.
Diversification Opportunities for BW LPG and Electromagnetic Geoservices
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BWLPG and Electromagnetic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and Electromagnetic Geoservices AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromagnetic Geoservices 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 Electromagnetic Geoservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromagnetic Geoservices has no effect on the direction of BW LPG i.e., BW LPG and Electromagnetic Geoservices go up and down completely randomly.
Pair Corralation between BW LPG and Electromagnetic Geoservices
Assuming the 90 days trading horizon BW LPG is expected to generate 0.77 times more return on investment than Electromagnetic Geoservices. However, BW LPG is 1.3 times less risky than Electromagnetic Geoservices. It trades about 0.01 of its potential returns per unit of risk. Electromagnetic Geoservices ASA is currently generating about 0.01 per unit of risk. If you would invest 12,642 in BW LPG on September 12, 2024 and sell it today you would lose (42.00) from holding BW LPG or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
BW LPG vs. Electromagnetic Geoservices AS
Performance |
| Timeline |
| BW LPG |
| Electromagnetic Geoservices |
BW LPG and Electromagnetic Geoservices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Electromagnetic Geoservices
The main advantage of trading using opposite BW LPG and Electromagnetic Geoservices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Electromagnetic Geoservices 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 Electromagnetic Geoservices will offset losses from the drop in Electromagnetic Geoservices' long position.The idea behind BW LPG and Electromagnetic Geoservices ASA 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.| Electromagnetic Geoservices vs. Solstad Offsho | Electromagnetic Geoservices vs. Prosafe SE | Electromagnetic Geoservices vs. BW Offshore | Electromagnetic Geoservices vs. Kongsberg Gruppen 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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