Correlation Between Odfjell Drilling and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Odfjell Drilling 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 Odfjell Drilling and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Odfjell Drilling and BW Offshore, you can compare the effects of market volatilities on Odfjell Drilling 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 Odfjell Drilling with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Odfjell Drilling and BW Offshore.
Diversification Opportunities for Odfjell Drilling and BW Offshore
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Odfjell and BWO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Odfjell Drilling and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Odfjell Drilling 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 Odfjell Drilling 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 Odfjell Drilling i.e., Odfjell Drilling and BW Offshore go up and down completely randomly.
Pair Corralation between Odfjell Drilling and BW Offshore
Assuming the 90 days trading horizon Odfjell Drilling is expected to generate 0.49 times more return on investment than BW Offshore. However, Odfjell Drilling is 2.05 times less risky than BW Offshore. It trades about 0.09 of its potential returns per unit of risk. BW Offshore is currently generating about -0.13 per unit of risk. If you would invest 4,917 in Odfjell Drilling on August 28, 2024 and sell it today you would earn a total of 143.00 from holding Odfjell Drilling or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Odfjell Drilling vs. BW Offshore
Performance |
| Timeline |
| Odfjell Drilling |
| BW Offshore |
Odfjell Drilling and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Odfjell Drilling and BW Offshore
The main advantage of trading using opposite Odfjell Drilling and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Odfjell Drilling 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 Odfjell Drilling 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.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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |