Correlation Between BW Offshore and Micron Technology
Can any of the company-specific risk be diversified away by investing in both BW Offshore and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore Limited and Micron Technology, you can compare the effects of market volatilities on BW Offshore and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Micron Technology.
Diversification Opportunities for BW Offshore and Micron Technology
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BWOFY and Micron is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Limited are associated (or correlated) with Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of BW Offshore i.e., BW Offshore and Micron Technology go up and down completely randomly.
Pair Corralation between BW Offshore and Micron Technology
Assuming the 90 days horizon BW Offshore Limited is expected to generate 0.38 times more return on investment than Micron Technology. However, BW Offshore Limited is 2.66 times less risky than Micron Technology. It trades about -0.06 of its potential returns per unit of risk. Micron Technology is currently generating about -0.13 per unit of risk. If you would invest 559.00 in BW Offshore Limited on August 30, 2024 and sell it today you would lose (9.00) from holding BW Offshore Limited or give up 1.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BW Offshore Limited vs. Micron Technology
Performance |
| Timeline |
| BW Offshore Limited |
| Micron Technology |
BW Offshore and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW Offshore and Micron Technology
The main advantage of trading using opposite BW Offshore and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| BW Offshore vs. Legacy Education | BW Offshore vs. Apple Inc | BW Offshore vs. NVIDIA | BW Offshore vs. Microsoft |
| Micron Technology vs. First Solar | Micron Technology vs. Sunrun Inc | Micron Technology vs. Canadian Solar | Micron Technology vs. SolarEdge Technologies |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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