Correlation Between XXL ASA and BW Offshore
Can any of the company-specific risk be diversified away by investing in both XXL ASA 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 XXL ASA and BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XXL ASA and BW Offshore, you can compare the effects of market volatilities on XXL ASA 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 XXL ASA with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of XXL ASA and BW Offshore.
Diversification Opportunities for XXL ASA and BW Offshore
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XXL and BWO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding XXL ASA and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and XXL ASA 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 XXL ASA 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 XXL ASA i.e., XXL ASA and BW Offshore go up and down completely randomly.
Pair Corralation between XXL ASA and BW Offshore
Assuming the 90 days trading horizon XXL ASA is expected to under-perform the BW Offshore. In addition to that, XXL ASA is 4.63 times more volatile than BW Offshore. It trades about -0.37 of its total potential returns per unit of risk. BW Offshore is currently generating about -0.13 per unit of volatility. If you would invest 3,083 in BW Offshore on August 27, 2024 and sell it today you would lose (303.00) from holding BW Offshore or give up 9.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
XXL ASA vs. BW Offshore
Performance |
| Timeline |
| XXL ASA |
| BW Offshore |
XXL ASA and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XXL ASA and BW Offshore
The main advantage of trading using opposite XXL ASA and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XXL ASA 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 XXL ASA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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