Correlation Between Global Ship and BW LPG
Can any of the company-specific risk be diversified away by investing in both Global Ship and BW LPG 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 Global Ship and BW LPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and BW LPG Limited, you can compare the effects of market volatilities on Global Ship and BW LPG 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 Global Ship with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and BW LPG.
Diversification Opportunities for Global Ship and BW LPG
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and BWLP is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and Global Ship 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 Global Ship Lease are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of Global Ship i.e., Global Ship and BW LPG go up and down completely randomly.
Pair Corralation between Global Ship and BW LPG
Considering the 90-day investment horizon Global Ship Lease is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 1.19 times less risky than BW LPG. The stock trades about -0.2 of its potential returns per unit of risk. The BW LPG Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,280 in BW LPG Limited on September 1, 2024 and sell it today you would lose (53.00) from holding BW LPG Limited or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. BW LPG Limited
Performance |
| Timeline |
| Global Ship Lease |
| BW LPG Limited |
Global Ship and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and BW LPG
The main advantage of trading using opposite Global Ship and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, BW LPG 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 LPG will offset losses from the drop in BW LPG's long position.| Global Ship vs. Costamare | Global Ship vs. Navios Maritime Partners | Global Ship vs. Genco Shipping Trading | Global Ship vs. Star Bulk Carriers |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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