Correlation Between Caledonia Investments and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and BW Offshore 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 Caledonia Investments and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and BW Offshore, you can compare the effects of market volatilities on Caledonia Investments and BW Offshore 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 Caledonia Investments with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and BW Offshore.
Diversification Opportunities for Caledonia Investments and BW Offshore
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Caledonia and 0RKH is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and BW Offshore go up and down completely randomly.
Pair Corralation between Caledonia Investments and BW Offshore
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 0.43 times more return on investment than BW Offshore. However, Caledonia Investments is 2.34 times less risky than BW Offshore. It trades about 0.48 of its potential returns per unit of risk. BW Offshore is currently generating about 0.04 per unit of risk. If you would invest 347,000 in Caledonia Investments on November 3, 2024 and sell it today you would earn a total of 32,500 from holding Caledonia Investments or generate 9.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. BW Offshore
Performance |
| Timeline |
| Caledonia Investments |
| BW Offshore |
Caledonia Investments and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and BW Offshore
The main advantage of trading using opposite Caledonia Investments and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.The idea behind Caledonia Investments and BW Offshore 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.
| BW Offshore vs. DXC Technology Co | BW Offshore vs. EJF Investments | BW Offshore vs. Seraphim Space Investment | BW Offshore vs. Monks Investment Trust |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |