Correlation Between BW LPG and Jinhui Shipping
Can any of the company-specific risk be diversified away by investing in both BW LPG and Jinhui Shipping 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 Jinhui Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and Jinhui Shipping and, you can compare the effects of market volatilities on BW LPG and Jinhui Shipping 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 Jinhui Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and Jinhui Shipping.
Diversification Opportunities for BW LPG and Jinhui Shipping
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between BWLPG and Jinhui is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and Jinhui Shipping and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Shipping 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 Jinhui Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Shipping has no effect on the direction of BW LPG i.e., BW LPG and Jinhui Shipping go up and down completely randomly.
Pair Corralation between BW LPG and Jinhui Shipping
Assuming the 90 days trading horizon BW LPG is expected to generate 1.74 times less return on investment than Jinhui Shipping. But when comparing it to its historical volatility, BW LPG is 1.49 times less risky than Jinhui Shipping. It trades about 0.1 of its potential returns per unit of risk. Jinhui Shipping and is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 612.00 in Jinhui Shipping and on August 25, 2024 and sell it today you would earn a total of 42.00 from holding Jinhui Shipping and or generate 6.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW LPG vs. Jinhui Shipping and
Performance |
| Timeline |
| BW LPG |
| Jinhui Shipping |
BW LPG and Jinhui Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and Jinhui Shipping
The main advantage of trading using opposite BW LPG and Jinhui Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, Jinhui Shipping 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 Jinhui Shipping will offset losses from the drop in Jinhui Shipping's long position.The idea behind BW LPG and Jinhui Shipping and 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.| Jinhui Shipping vs. Shelf Drilling | Jinhui Shipping vs. Solstad Offsho | Jinhui Shipping vs. Eidesvik Offshore ASA | Jinhui Shipping 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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