Correlation Between Bakken Water and Bristow

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

By analyzing existing cross correlation between Bakken Water Transfer and Bristow Group, you can compare the effects of market volatilities on Bakken Water and Bristow 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 Bakken Water with a short position of Bristow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bakken Water and Bristow.

Diversification Opportunities for Bakken Water and Bristow

0.08

Correlation Coefficient

Bakken Water  Bristow

Significant diversification

The 3 months correlation between Bakken and Bristow is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bakken Water Transfer and Bristow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristow Group and Bakken Water 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 Bakken Water Transfer are associated (or correlated) with Bristow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristow Group has no effect on the direction of Bakken Water i.e., Bakken Water and Bristow go up and down completely randomly.

Pair Corralation between Bakken Water and Bristow

Given the investment horizon of 90 days Bakken Water Transfer is expected to generate 12.72 times more return on investment than Bristow. However, Bakken Water is 12.72 times more volatile than Bristow Group. It trades about 0.34 of its potential returns per unit of risk. Bristow Group is currently generating about -0.19 per unit of risk. If you would invest  1.70  in Bakken Water Transfer on September 17, 2024 and sell it today you would earn a total of  4.30  from holding Bakken Water Transfer or generate 252.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bakken Water Transfer  vs.  Bristow Group

Bakken Water Transfer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bakken Water Transfer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bakken Water showed solid returns over the last few months and may actually be approaching a breakup point.

Bristow Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bakken Water and Bristow

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

The idea behind Bakken Water Transfer and Bristow Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.