Correlation Between BW OFFSHORE and PulteGroup

Can any of the company-specific risk be diversified away by investing in both BW OFFSHORE and PulteGroup 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 PulteGroup 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 PulteGroup, you can compare the effects of market volatilities on BW OFFSHORE and PulteGroup 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 PulteGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW OFFSHORE and PulteGroup.

Diversification Opportunities for BW OFFSHORE and PulteGroup

0.29

Correlation Coefficient

BW OFFSHORE  PulteGroup

Modest diversification

The 3 months correlation between XY81 and PulteGroup is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup 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 PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and PulteGroup go up and down completely randomly.

Pair Corralation between BW OFFSHORE and PulteGroup

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to under-perform the PulteGroup. In addition to that, BW OFFSHORE is 1.29 times more volatile than PulteGroup. It trades about -0.08 of its total potential returns per unit of risk. PulteGroup is currently generating about 0.14 per unit of volatility. If you would invest  11,966  in PulteGroup on August 31, 2024 and sell it today you would earn a total of  932.00  from holding PulteGroup or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BW OFFSHORE LTD  vs.  PulteGroup

BW OFFSHORE LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW OFFSHORE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BW OFFSHORE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PulteGroup

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PulteGroup may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with BW OFFSHORE and PulteGroup

The main advantage of trading using opposite BW OFFSHORE and PulteGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW OFFSHORE position performs unexpectedly, PulteGroup 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 PulteGroup will offset losses from the drop in PulteGroup's long position.

The idea behind BW OFFSHORE LTD and PulteGroup 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.