Correlation Between River Tech and BW Offshore
Can any of the company-specific risk be diversified away by investing in both River Tech 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 River Tech and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River Tech plc and BW Offshore, you can compare the effects of market volatilities on River Tech 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 River Tech with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Tech and BW Offshore.
Diversification Opportunities for River Tech and BW Offshore
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between River and BWO is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding River Tech plc and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and River Tech 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 River Tech plc 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 River Tech i.e., River Tech and BW Offshore go up and down completely randomly.
Pair Corralation between River Tech and BW Offshore
Assuming the 90 days trading horizon River Tech plc is expected to generate 2.14 times more return on investment than BW Offshore. However, River Tech is 2.14 times more volatile than BW Offshore. It trades about -0.04 of its potential returns per unit of risk. BW Offshore is currently generating about -0.18 per unit of risk. If you would invest 1,820 in River Tech plc on September 4, 2024 and sell it today you would lose (200.00) from holding River Tech plc or give up 10.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
River Tech plc vs. BW Offshore
Performance |
| Timeline |
| River Tech plc |
| BW Offshore |
River Tech and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River Tech and BW Offshore
The main advantage of trading using opposite River Tech and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River Tech 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.| River Tech vs. Huddlestock Fintech As | River Tech vs. Xplora Technologies As | River Tech vs. Ocean Sun As | River Tech vs. Polight 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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