Can any of the company-specific risk be diversified away by investing in both BW Offshore and Akastor ASA 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 Akastor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Akastor ASA, you can compare the effects of market volatilities on BW Offshore and Akastor ASA 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 Akastor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Akastor ASA.
Diversification Opportunities for BW Offshore and Akastor ASA
The 3 months correlation between BWO and Akastor is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Akastor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akastor ASA 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 are associated (or correlated) with Akastor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akastor ASA has no effect on the direction of BW Offshore i.e., BW Offshore and Akastor ASA go up and down completely randomly.
Pair Corralation between BW Offshore and Akastor ASA
Assuming the 90 days trading horizon BW Offshore is expected to generate 1.05 times more return on investment than Akastor ASA. However, BW Offshore is 1.05 times more volatile than Akastor ASA. It trades about 0.42 of its potential returns per unit of risk. Akastor ASA is currently generating about 0.27 per unit of risk. If you would invest 2,681 in BW Offshore on March 6, 2024 and sell it today you would earn a total of 404.00 from holding BW Offshore or generate 15.07% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BW Offshore disclosed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Akastor ASA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Akastor ASA displayed solid returns over the last few months and may actually be approaching a breakup point.