Correlation Between BW LPG and Golden Ocean
Can any of the company-specific risk be diversified away by investing in both BW LPG and Golden Ocean 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 Golden Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and Golden Ocean Group, you can compare the effects of market volatilities on BW LPG and Golden Ocean 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 Golden Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Golden Ocean.
Diversification Opportunities for BW LPG and Golden Ocean
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BWLPG and Golden is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and Golden Ocean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ocean Group 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 Golden Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ocean Group has no effect on the direction of BW LPG i.e., BW LPG and Golden Ocean go up and down completely randomly.
Pair Corralation between BW LPG and Golden Ocean
Assuming the 90 days trading horizon BW LPG is expected to generate 1.19 times less return on investment than Golden Ocean. But when comparing it to its historical volatility, BW LPG is 1.13 times less risky than Golden Ocean. It trades about 0.1 of its potential returns per unit of risk. Golden Ocean Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,740 in Golden Ocean Group on August 25, 2024 and sell it today you would earn a total of 560.00 from holding Golden Ocean Group or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW LPG vs. Golden Ocean Group
Performance |
| Timeline |
| BW LPG |
| Golden Ocean Group |
BW LPG and Golden Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Golden Ocean
The main advantage of trading using opposite BW LPG and Golden Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Golden Ocean 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 Golden Ocean will offset losses from the drop in Golden Ocean's long position.The idea behind BW LPG and Golden Ocean Group 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.| Golden Ocean vs. Frontline | Golden Ocean vs. BW LPG | Golden Ocean vs. Jinhui Shipping and | Golden Ocean vs. FLEX LNG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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