Correlation Between BW Offshore and Romerike Sparebank
Can any of the company-specific risk be diversified away by investing in both BW Offshore and Romerike Sparebank 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 Romerike Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Romerike Sparebank, you can compare the effects of market volatilities on BW Offshore and Romerike Sparebank 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 Romerike Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Romerike Sparebank.
Diversification Opportunities for BW Offshore and Romerike Sparebank
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BWO and Romerike is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Romerike Sparebank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romerike Sparebank 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 Romerike Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romerike Sparebank has no effect on the direction of BW Offshore i.e., BW Offshore and Romerike Sparebank go up and down completely randomly.
Pair Corralation between BW Offshore and Romerike Sparebank
Assuming the 90 days trading horizon BW Offshore is expected to under-perform the Romerike Sparebank. In addition to that, BW Offshore is 5.2 times more volatile than Romerike Sparebank. It trades about -0.04 of its total potential returns per unit of risk. Romerike Sparebank is currently generating about 0.11 per unit of volatility. If you would invest 12,400 in Romerike Sparebank on September 1, 2024 and sell it today you would earn a total of 180.00 from holding Romerike Sparebank or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. Romerike Sparebank
Performance |
| Timeline |
| BW Offshore |
| Romerike Sparebank |
BW Offshore and Romerike Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Romerike Sparebank
The main advantage of trading using opposite BW Offshore and Romerike Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Romerike Sparebank 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 Romerike Sparebank will offset losses from the drop in Romerike Sparebank's long position.The idea behind BW Offshore and Romerike Sparebank 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.| Romerike Sparebank vs. SD Standard Drilling | Romerike Sparebank vs. Skue Sparebank | Romerike Sparebank vs. Grong Sparebank | Romerike Sparebank vs. Lery Seafood Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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