Correlation Between BW Energy and Panoro Energy

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

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

Diversification Opportunities for BW Energy and Panoro Energy

0.49

Correlation Coefficient

BW Energy  Panoro Energy

Very weak diversification

The 3 months correlation between BWE and Panoro is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BW Energy and Panoro Energy ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panoro Energy ASA and BW Energy 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 Energy are associated (or correlated) with Panoro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panoro Energy ASA has no effect on the direction of BW Energy i.e., BW Energy and Panoro Energy go up and down completely randomly.

Pair Corralation between BW Energy and Panoro Energy

Assuming the 90 days trading horizon BW Energy is expected to under-perform the Panoro Energy. In addition to that, BW Energy is 1.01 times more volatile than Panoro Energy ASA. It trades about -0.04 of its total potential returns per unit of risk. Panoro Energy ASA is currently generating about 0.02 per unit of volatility. If you would invest  2,657  in Panoro Energy ASA on September 12, 2024 and sell it today you would earn a total of  48.00  from holding Panoro Energy ASA or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

BW Energy  vs.  Panoro Energy ASA

BW Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, BW Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Panoro Energy ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Panoro Energy ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Panoro Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BW Energy and Panoro Energy

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

The idea behind BW Energy and Panoro Energy ASA 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.