Correlation Between BW Offshore and Waste Plastic
Can any of the company-specific risk be diversified away by investing in both BW Offshore and Waste Plastic 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 Waste Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Waste Plastic Upcycling, you can compare the effects of market volatilities on BW Offshore and Waste Plastic 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 Waste Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Waste Plastic.
Diversification Opportunities for BW Offshore and Waste Plastic
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BWO and Waste is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Waste Plastic Upcycling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Plastic Upcycling 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 Waste Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Plastic Upcycling has no effect on the direction of BW Offshore i.e., BW Offshore and Waste Plastic go up and down completely randomly.
Pair Corralation between BW Offshore and Waste Plastic
Assuming the 90 days trading horizon BW Offshore is expected to generate 1.78 times less return on investment than Waste Plastic. But when comparing it to its historical volatility, BW Offshore is 3.87 times less risky than Waste Plastic. It trades about 0.2 of its potential returns per unit of risk. Waste Plastic Upcycling is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,230 in Waste Plastic Upcycling on November 10, 2024 and sell it today you would earn a total of 255.00 from holding Waste Plastic Upcycling or generate 20.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BW Offshore vs. Waste Plastic Upcycling
Performance |
| Timeline |
| BW Offshore |
| Waste Plastic Upcycling |
BW Offshore and Waste Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Waste Plastic
The main advantage of trading using opposite BW Offshore and Waste Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Waste Plastic 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 Waste Plastic will offset losses from the drop in Waste Plastic's long position.The idea behind BW Offshore and Waste Plastic Upcycling 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.| Waste Plastic vs. Norwegian Air Shuttle | Waste Plastic vs. Sunndal Sparebank | Waste Plastic vs. Xplora Technologies As | Waste Plastic vs. Aurskog Sparebank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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