Correlation Between BW Offshore and Charter Communications

Can any of the company-specific risk be diversified away by investing in both BW Offshore and Charter Communications 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 Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BW Offshore and Charter Communications Cl, you can compare the effects of market volatilities on BW Offshore and Charter Communications 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 Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Charter Communications.

Diversification Opportunities for BW Offshore and Charter Communications

0.04

Correlation Coefficient

BW Offshore  Charter Communications

Significant diversification

The 3 months correlation between 0RKH and Charter is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Charter Communications Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of BW Offshore i.e., BW Offshore and Charter Communications go up and down completely randomly.

Pair Corralation between BW Offshore and Charter Communications

Assuming the 90 days trading horizon BW Offshore is expected to generate 6.38 times less return on investment than Charter Communications. In addition to that, BW Offshore is 1.02 times more volatile than Charter Communications Cl. It trades about 0.01 of its total potential returns per unit of risk. Charter Communications Cl is currently generating about 0.09 per unit of volatility. If you would invest  34,672  in Charter Communications Cl on September 2, 2024 and sell it today you would earn a total of  4,723  from holding Charter Communications Cl or generate 13.62% return on investment over 90 days.

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

BW Offshore  vs.  Charter Communications Cl

BW Offshore

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Charter Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications Cl are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Charter Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW Offshore and Charter Communications

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

The idea behind BW Offshore and Charter Communications Cl 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.