Correlation Between BW Offshore and Shelf Drilling
Can any of the company-specific risk be diversified away by investing in both BW Offshore and Shelf Drilling 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 Shelf Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Shelf Drilling, you can compare the effects of market volatilities on BW Offshore and Shelf Drilling 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 Shelf Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Shelf Drilling.
Diversification Opportunities for BW Offshore and Shelf Drilling
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between BWO and Shelf is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Shelf Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelf Drilling 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 Shelf Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelf Drilling has no effect on the direction of BW Offshore i.e., BW Offshore and Shelf Drilling go up and down completely randomly.
Pair Corralation between BW Offshore and Shelf Drilling
Assuming the 90 days trading horizon BW Offshore is expected to generate 0.7 times more return on investment than Shelf Drilling. However, BW Offshore is 1.43 times less risky than Shelf Drilling. It trades about -0.13 of its potential returns per unit of risk. Shelf Drilling is currently generating about -0.46 per unit of risk. If you would invest 3,083 in BW Offshore on August 27, 2024 and sell it today you would lose (303.00) from holding BW Offshore or give up 9.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. Shelf Drilling
Performance |
| Timeline |
| BW Offshore |
| Shelf Drilling |
BW Offshore and Shelf Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Shelf Drilling
The main advantage of trading using opposite BW Offshore and Shelf Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Shelf Drilling 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 Shelf Drilling will offset losses from the drop in Shelf Drilling's long position.The idea behind BW Offshore and Shelf Drilling 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.| Shelf Drilling vs. BW Offshore | Shelf Drilling vs. Elkem ASA | Shelf Drilling vs. Solstad Offsho | Shelf Drilling vs. Arcticzymes Technologies ASA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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