Correlation Between Dno ASA and BW Offshore

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

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

Diversification Opportunities for Dno ASA and BW Offshore

0.26

Correlation Coefficient

Dno ASA  BW Offshore

Modest diversification

The 3 months correlation between Dno and BWO is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dno ASA and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore and Dno ASA 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 Dno ASA are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Dno ASA i.e., Dno ASA and BW Offshore go up and down completely randomly.

Pair Corralation between Dno ASA and BW Offshore

Assuming the 90 days trading horizon Dno ASA is expected to generate 1.88 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Dno ASA is 1.05 times less risky than BW Offshore. It trades about 0.04 of its potential returns per unit of risk. BW Offshore is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,002  in BW Offshore on September 13, 2024 and sell it today you would earn a total of  768.00  from holding BW Offshore or generate 38.36% return on investment over 90 days.

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

Dno ASA  vs.  BW Offshore

Dno ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dno ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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.

Pair Trading with Dno ASA and BW Offshore

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

The idea behind Dno ASA and BW 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.