Correlation Between BW Offshore and Sea1 Offshore

Can any of the company-specific risk be diversified away by investing in both BW Offshore and Sea1 Offshore 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 Sea1 Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BW Offshore and Sea1 Offshore, you can compare the effects of market volatilities on BW Offshore and Sea1 Offshore 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 Sea1 Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Sea1 Offshore.

Diversification Opportunities for BW Offshore and Sea1 Offshore

0.06

Correlation Coefficient

BW Offshore  Sea1 Offshore

Significant diversification

The 3 months correlation between BWO and Sea1 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Sea1 Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea1 Offshore 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 Sea1 Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea1 Offshore has no effect on the direction of BW Offshore i.e., BW Offshore and Sea1 Offshore go up and down completely randomly.

Pair Corralation between BW Offshore and Sea1 Offshore

Assuming the 90 days trading horizon BW Offshore is expected to generate 0.88 times more return on investment than Sea1 Offshore. However, BW Offshore is 1.14 times less risky than Sea1 Offshore. It trades about -0.01 of its potential returns per unit of risk. Sea1 Offshore is currently generating about -0.36 per unit of risk. If you would invest  2,780  in BW Offshore on September 24, 2024 and sell it today you would lose (30.00) from holding BW Offshore or give up 1.08% of portfolio value over 90 days.

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

BW Offshore  vs.  Sea1 Offshore

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. 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.

Sea1 Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sea1 Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with BW Offshore and Sea1 Offshore

The main advantage of trading using opposite BW Offshore and Sea1 Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore position performs unexpectedly, Sea1 Offshore 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 Sea1 Offshore will offset losses from the drop in Sea1 Offshore's long position.

The idea behind BW Offshore and Sea1 Offshore 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.