Correlation Between BW Offshore and Schibsted ASA

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

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

Diversification Opportunities for BW Offshore and Schibsted ASA

-0.29

Correlation Coefficient

BW Offshore  Schibsted ASA

Very good diversification

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

Pair Corralation between BW Offshore and Schibsted ASA

Assuming the 90 days trading horizon BW Offshore is expected to generate 2.09 times less return on investment than Schibsted ASA. In addition to that, BW Offshore is 1.59 times more volatile than Schibsted ASA B. It trades about 0.03 of its total potential returns per unit of risk. Schibsted ASA B is currently generating about 0.1 per unit of volatility. If you would invest  31,460  in Schibsted ASA B on September 20, 2024 and sell it today you would earn a total of  3,540  from holding Schibsted ASA B or generate 11.25% 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.  Schibsted ASA B

BW Offshore

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, BW Offshore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Schibsted ASA B

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schibsted ASA B are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Schibsted ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BW Offshore and Schibsted ASA

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

The idea behind BW Offshore and Schibsted ASA B 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.