Correlation Between BW Offshore and Alternus Energy
Can any of the company-specific risk be diversified away by investing in both BW Offshore and Alternus Energy 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 Alternus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Alternus Energy Group, you can compare the effects of market volatilities on BW Offshore and Alternus Energy 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 Alternus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Alternus Energy.
Diversification Opportunities for BW Offshore and Alternus Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BWO and Alternus is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Alternus Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternus Energy Group 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 Alternus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternus Energy Group has no effect on the direction of BW Offshore i.e., BW Offshore and Alternus Energy go up and down completely randomly.
Pair Corralation between BW Offshore and Alternus Energy
Assuming the 90 days trading horizon BW Offshore is expected to generate 54.04 times less return on investment than Alternus Energy. But when comparing it to its historical volatility, BW Offshore is 7.9 times less risky than Alternus Energy. It trades about 0.01 of its potential returns per unit of risk. Alternus Energy Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 115.00 in Alternus Energy Group on October 26, 2024 and sell it today you would lose (15.00) from holding Alternus Energy Group or give up 13.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. Alternus Energy Group
Performance |
| Timeline |
| BW Offshore |
| Alternus Energy Group |
BW Offshore and Alternus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Alternus Energy
The main advantage of trading using opposite BW Offshore and Alternus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Alternus Energy 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 Alternus Energy will offset losses from the drop in Alternus Energy's long position.The idea behind BW Offshore and Alternus Energy 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.| Alternus Energy vs. Helgeland Sparebank | Alternus Energy vs. Napatech AS | Alternus Energy vs. Nordic Mining ASA | Alternus Energy vs. Norwegian Air Shuttle |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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