Correlation Between Small Cap and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and BW Offshore Limited, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and BW Offshore.
Diversification Opportunities for Small Cap and BW Offshore
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and BWOFY is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Small Cap 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 Small Cap Premium 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 Limited has no effect on the direction of Small Cap i.e., Small Cap and BW Offshore go up and down completely randomly.
Pair Corralation between Small Cap and BW Offshore
Considering the 90-day investment horizon Small Cap is expected to generate 12.71 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Small Cap Premium is 6.23 times less risky than BW Offshore. It trades about 0.05 of its potential returns per unit of risk. BW Offshore Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 461.00 in BW Offshore Limited on August 31, 2024 and sell it today you would earn a total of 94.00 from holding BW Offshore Limited or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. BW Offshore Limited
Performance |
| Timeline |
| Small Cap Premium |
| BW Offshore Limited |
Small Cap and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and BW Offshore
The main advantage of trading using opposite Small Cap and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| BW Offshore vs. Citizens | BW Offshore vs. Smith Douglas Homes | BW Offshore vs. Old Republic International | BW Offshore vs. Hudson Pacific Properties |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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