Correlation Between BW Offshore and Radcom

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

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

Diversification Opportunities for BW Offshore and Radcom

0.48

Correlation Coefficient

BW Offshore  Radcom

Very weak diversification

The 3 months correlation between BWOFY and Radcom is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Limited are associated (or correlated) with Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of BW Offshore i.e., BW Offshore and Radcom go up and down completely randomly.

Pair Corralation between BW Offshore and Radcom

Assuming the 90 days horizon BW Offshore is expected to generate 4.03 times less return on investment than Radcom. But when comparing it to its historical volatility, BW Offshore Limited is 6.28 times less risky than Radcom. It trades about 0.2 of its potential returns per unit of risk. Radcom is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,074  in Radcom on September 13, 2024 and sell it today you would earn a total of  126.00  from holding Radcom or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

BW Offshore Limited  vs.  Radcom

BW Offshore Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, BW Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

Radcom

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BW Offshore and Radcom

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

The idea behind BW Offshore Limited and Radcom 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.