Correlation Between Pacific Basin and BW LPG
Can any of the company-specific risk be diversified away by investing in both Pacific Basin 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 Pacific Basin and BW LPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and BW LPG Limited, you can compare the effects of market volatilities on Pacific Basin 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 Pacific Basin with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and BW LPG.
Diversification Opportunities for Pacific Basin and BW LPG
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pacific and BWLLF is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping 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 Pacific Basin 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 Pacific Basin Shipping 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 Pacific Basin i.e., Pacific Basin and BW LPG go up and down completely randomly.
Pair Corralation between Pacific Basin and BW LPG
Assuming the 90 days horizon Pacific Basin is expected to generate 14.42 times less return on investment than BW LPG. But when comparing it to its historical volatility, Pacific Basin Shipping is 2.46 times less risky than BW LPG. It trades about 0.01 of its potential returns per unit of risk. BW LPG Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 679.00 in BW LPG Limited on August 31, 2024 and sell it today you would earn a total of 1,162 from holding BW LPG Limited or generate 171.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 79.43% |
| Values | Daily Returns |
Pacific Basin Shipping vs. BW LPG Limited
Performance |
| Timeline |
| Pacific Basin Shipping |
| BW LPG Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Pacific Basin and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Basin and BW LPG
The main advantage of trading using opposite Pacific Basin and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin 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.| Pacific Basin vs. Kawasaki Kisen Kaisha | Pacific Basin vs. Hapag Lloyd Aktiengesellschaft | Pacific Basin vs. Hapag Lloyd Aktiengesellschaft | Pacific Basin vs. SITC International Holdings |
| BW LPG vs. Hutchison Port Holdings | BW LPG vs. Kawasaki Kisen Kaisha | BW LPG vs. MPC Container Ships | BW LPG vs. Hapag Lloyd Aktiengesellschaft |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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