Correlation Between BW Offshore and 5Th Planet
Can any of the company-specific risk be diversified away by investing in both BW Offshore and 5Th Planet 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 Offshore and 5Th Planet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and 5Th Planet Games, you can compare the effects of market volatilities on BW Offshore and 5Th Planet 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 Offshore with a short position of 5Th Planet. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and 5Th Planet.
Diversification Opportunities for BW Offshore and 5Th Planet
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BWO and 5Th is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and 5Th Planet Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5Th Planet Games and BW Offshore 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 Offshore are associated (or correlated) with 5Th Planet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5Th Planet Games has no effect on the direction of BW Offshore i.e., BW Offshore and 5Th Planet go up and down completely randomly.
Pair Corralation between BW Offshore and 5Th Planet
Assuming the 90 days trading horizon BW Offshore is expected to under-perform the 5Th Planet. But the stock apears to be less risky and, when comparing its historical volatility, BW Offshore is 1.11 times less risky than 5Th Planet. The stock trades about -0.04 of its potential returns per unit of risk. The 5Th Planet Games is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 108.00 in 5Th Planet Games on September 1, 2024 and sell it today you would earn a total of 9.00 from holding 5Th Planet Games or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. 5Th Planet Games
Performance |
| Timeline |
| BW Offshore |
| 5Th Planet Games |
BW Offshore and 5Th Planet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and 5Th Planet
The main advantage of trading using opposite BW Offshore and 5Th Planet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, 5Th Planet 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 5Th Planet will offset losses from the drop in 5Th Planet's long position.The idea behind BW Offshore and 5Th Planet Games 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.| 5Th Planet vs. Solstad Offsho | 5Th Planet vs. Saga Pure ASA | 5Th Planet vs. REC Silicon ASA | 5Th Planet vs. Kongsberg Automotive Holding |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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