Correlation Between BW OFFSHORE and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE and Fortescue Metals 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 BW OFFSHORE and Fortescue Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW OFFSHORE LTD and Fortescue Metals Group, you can compare the effects of market volatilities on BW OFFSHORE and Fortescue Metals 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 BW OFFSHORE with a short position of Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and Fortescue Metals.
Diversification Opportunities for BW OFFSHORE and Fortescue Metals
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XY81 and Fortescue is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and BW OFFSHORE 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 BW OFFSHORE LTD are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and Fortescue Metals go up and down completely randomly.
Pair Corralation between BW OFFSHORE and Fortescue Metals
Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to under-perform the Fortescue Metals. In addition to that, BW OFFSHORE is 1.07 times more volatile than Fortescue Metals Group. It trades about -0.11 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.15 per unit of volatility. If you would invest 1,103 in Fortescue Metals Group on November 7, 2024 and sell it today you would earn a total of 57.00 from holding Fortescue Metals Group or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
BW OFFSHORE LTD vs. Fortescue Metals Group
Performance |
| Timeline |
| BW OFFSHORE LTD |
| Fortescue Metals |
BW OFFSHORE and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BW OFFSHORE and Fortescue Metals
The main advantage of trading using opposite BW OFFSHORE and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW OFFSHORE position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| BW OFFSHORE vs. Schlumberger Limited | BW OFFSHORE vs. Halliburton | BW OFFSHORE vs. Tenaris SA | BW OFFSHORE vs. China Oilfield Services |
| Fortescue Metals vs. Transport International Holdings | Fortescue Metals vs. Broadcom | Fortescue Metals vs. NAGOYA RAILROAD | Fortescue Metals vs. VARIOUS EATERIES LS |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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