Correlation Between BW Offshore and American Shipping
Can any of the company-specific risk be diversified away by investing in both BW Offshore and American 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 Offshore and American Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and American Shipping, you can compare the effects of market volatilities on BW Offshore and American 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 Offshore with a short position of American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and American Shipping.
Diversification Opportunities for BW Offshore and American Shipping
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between BWO and American is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping 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 American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of BW Offshore i.e., BW Offshore and American Shipping go up and down completely randomly.
Pair Corralation between BW Offshore and American Shipping
Assuming the 90 days trading horizon BW Offshore is expected to generate 0.59 times more return on investment than American Shipping. However, BW Offshore is 1.7 times less risky than American Shipping. It trades about 0.03 of its potential returns per unit of risk. American Shipping is currently generating about 0.01 per unit of risk. If you would invest 2,285 in BW Offshore on August 29, 2024 and sell it today you would earn a total of 450.00 from holding BW Offshore or generate 19.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. American Shipping
Performance |
| Timeline |
| BW Offshore |
| American Shipping |
BW Offshore and American Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and American Shipping
The main advantage of trading using opposite BW Offshore and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, American 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 American Shipping will offset losses from the drop in American Shipping's long position.The idea behind BW Offshore and American Shipping 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.| American Shipping vs. Frontline | American Shipping vs. BW LPG | American Shipping vs. FLEX LNG | American Shipping vs. Dampskibsselskabet Norden AS |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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