Correlation Between BW LPG and Hafnia
Can any of the company-specific risk be diversified away by investing in both BW LPG and Hafnia 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 Hafnia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and Hafnia, you can compare the effects of market volatilities on BW LPG and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Hafnia.
Diversification Opportunities for BW LPG and Hafnia
Poor diversification
The 3 months correlation between BWLPG and Hafnia is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and Hafnia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia has no effect on the direction of BW LPG i.e., BW LPG and Hafnia go up and down completely randomly.
Pair Corralation between BW LPG and Hafnia
Assuming the 90 days trading horizon BW LPG is expected to generate 0.95 times more return on investment than Hafnia. However, BW LPG is 1.05 times less risky than Hafnia. It trades about 0.0 of its potential returns per unit of risk. Hafnia is currently generating about -0.2 per unit of risk. If you would invest 14,570 in BW LPG on August 29, 2024 and sell it today you would lose (70.00) from holding BW LPG or give up 0.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW LPG vs. Hafnia
Performance |
| Timeline |
| BW LPG |
| Hafnia |
BW LPG and Hafnia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Hafnia
The main advantage of trading using opposite BW LPG and Hafnia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Hafnia 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 Hafnia will offset losses from the drop in Hafnia's long position.The idea behind BW LPG and Hafnia 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.| Hafnia vs. Shelf Drilling | Hafnia vs. Solstad Offsho | Hafnia vs. Eidesvik Offshore ASA | Hafnia 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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