Correlation Between ASSOC BR and BW LPG

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

By analyzing existing cross correlation between ASSOC BR FOODS and BW LPG Limited, you can compare the effects of market volatilities on ASSOC BR and BW LPG 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 ASSOC BR with a short position of BW LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSOC BR and BW LPG.

Diversification Opportunities for ASSOC BR and BW LPG

0.21

Correlation Coefficient

ASSOC BR  BW LPG

Modest diversification

The 3 months correlation between ASSOC and BW9 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ASSOC BR FOODS and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and ASSOC BR 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 ASSOC BR FOODS are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of ASSOC BR i.e., ASSOC BR and BW LPG go up and down completely randomly.

Pair Corralation between ASSOC BR and BW LPG

Assuming the 90 days trading horizon ASSOC BR FOODS is expected to generate 0.58 times more return on investment than BW LPG. However, ASSOC BR FOODS is 1.74 times less risky than BW LPG. It trades about 0.04 of its potential returns per unit of risk. BW LPG Limited is currently generating about -0.07 per unit of risk. If you would invest  2,580  in ASSOC BR FOODS on September 13, 2024 and sell it today you would earn a total of  80.00  from holding ASSOC BR FOODS or generate 3.1% return on investment over 90 days.

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

ASSOC BR FOODS  vs.  BW LPG Limited

ASSOC BR FOODS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASSOC BR FOODS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ASSOC BR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ASSOC BR and BW LPG

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

The idea behind ASSOC BR FOODS and BW LPG Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.