Correlation Between Kraft Bank and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Kraft Bank 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 Kraft Bank and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kraft Bank Asa and BW Offshore, you can compare the effects of market volatilities on Kraft Bank 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 Kraft Bank with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Bank and BW Offshore.
Diversification Opportunities for Kraft Bank and BW Offshore
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kraft and BWO is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Bank Asa and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Kraft Bank 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 Kraft Bank Asa 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 Kraft Bank i.e., Kraft Bank and BW Offshore go up and down completely randomly.
Pair Corralation between Kraft Bank and BW Offshore
Assuming the 90 days trading horizon Kraft Bank Asa is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Kraft Bank Asa is 1.06 times less risky than BW Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The BW Offshore is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,888 in BW Offshore on August 29, 2024 and sell it today you would lose (128.00) from holding BW Offshore or give up 4.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kraft Bank Asa vs. BW Offshore
Performance |
| Timeline |
| Kraft Bank Asa |
| BW Offshore |
Kraft Bank and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kraft Bank and BW Offshore
The main advantage of trading using opposite Kraft Bank and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Bank 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.| Kraft Bank vs. DnB ASA | Kraft Bank vs. Sparebank 1 SR | Kraft Bank vs. Sparebank 1 SMN | Kraft Bank vs. Sparebanken Mre |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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