Correlation Between BW Offshore and Photocure

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

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

Diversification Opportunities for BW Offshore and Photocure

-0.09

Correlation Coefficient

BW Offshore  Photocure

Good diversification

The 3 months correlation between BWO and Photocure is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Photocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photocure 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 Photocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photocure has no effect on the direction of BW Offshore i.e., BW Offshore and Photocure go up and down completely randomly.

Pair Corralation between BW Offshore and Photocure

Assuming the 90 days trading horizon BW Offshore is expected to generate 1.18 times less return on investment than Photocure. In addition to that, BW Offshore is 1.37 times more volatile than Photocure. It trades about 0.05 of its total potential returns per unit of risk. Photocure is currently generating about 0.08 per unit of volatility. If you would invest  5,340  in Photocure on September 13, 2024 and sell it today you would earn a total of  510.00  from holding Photocure or generate 9.55% return on investment over 90 days.

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

BW Offshore  vs.  Photocure

BW Offshore

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Photocure

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Photocure are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Photocure may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BW Offshore and Photocure

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

The idea behind BW Offshore and Photocure 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.