Correlation Between BW LPG and TORM Plc
Can any of the company-specific risk be diversified away by investing in both BW LPG and TORM Plc 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 TORM Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW LPG and TORM plc, you can compare the effects of market volatilities on BW LPG and TORM Plc 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 TORM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW LPG and TORM Plc.
Diversification Opportunities for BW LPG and TORM Plc
Poor diversification
The 3 months correlation between BWLPG and TORM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BW LPG and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc 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 TORM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TORM plc has no effect on the direction of BW LPG i.e., BW LPG and TORM Plc go up and down completely randomly.
Pair Corralation between BW LPG and TORM Plc
Assuming the 90 days trading horizon BW LPG is expected to generate 1.15 times more return on investment than TORM Plc. However, BW LPG is 1.15 times more volatile than TORM plc. It trades about -0.1 of its potential returns per unit of risk. TORM plc is currently generating about -0.42 per unit of risk. If you would invest 14,150 in BW LPG on September 1, 2024 and sell it today you would lose (760.00) from holding BW LPG or give up 5.37% 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. TORM plc
Performance |
| Timeline |
| BW LPG |
| TORM plc |
BW LPG and TORM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW LPG and TORM Plc
The main advantage of trading using opposite BW LPG and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW LPG position performs unexpectedly, TORM Plc 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 TORM Plc will offset losses from the drop in TORM Plc's long position.The idea behind BW LPG and TORM plc 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.| TORM Plc vs. Danske Bank AS | TORM Plc vs. DSV Panalpina AS | TORM Plc vs. AP Mller | TORM Plc vs. Vestas Wind Systems |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |