Correlation Between REC Silicon and BW LPG
Can any of the company-specific risk be diversified away by investing in both REC Silicon 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 REC Silicon and BW LPG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REC Silicon ASA and BW LPG, you can compare the effects of market volatilities on REC Silicon 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 REC Silicon with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC Silicon and BW LPG.
Diversification Opportunities for REC Silicon and BW LPG
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between REC and BWLPG is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and BW LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG and REC Silicon 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 REC Silicon ASA 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 has no effect on the direction of REC Silicon i.e., REC Silicon and BW LPG go up and down completely randomly.
Pair Corralation between REC Silicon and BW LPG
Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the BW LPG. In addition to that, REC Silicon is 4.14 times more volatile than BW LPG. It trades about -0.29 of its total potential returns per unit of risk. BW LPG is currently generating about 0.1 per unit of volatility. If you would invest 14,430 in BW LPG on August 25, 2024 and sell it today you would earn a total of 580.00 from holding BW LPG or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
REC Silicon ASA vs. BW LPG
Performance |
| Timeline |
| REC Silicon ASA |
| BW LPG |
REC Silicon and BW LPG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REC Silicon and BW LPG
The main advantage of trading using opposite REC Silicon and BW LPG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC Silicon 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.| REC Silicon vs. Aker Horizons AS | REC Silicon vs. MPC Container Ships | REC Silicon vs. Nordic Semiconductor ASA |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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