Correlation Between Eastern and BW Offshore

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

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

Diversification Opportunities for Eastern and BW Offshore

-0.33

Correlation Coefficient

Eastern  BW Offshore

Very good diversification

The 3 months correlation between Eastern and BWOFY is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and Eastern 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 Eastern Co 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 Limited has no effect on the direction of Eastern i.e., Eastern and BW Offshore go up and down completely randomly.

Pair Corralation between Eastern and BW Offshore

Considering the 90-day investment horizon Eastern Co is expected to under-perform the BW Offshore. In addition to that, Eastern is 1.16 times more volatile than BW Offshore Limited. It trades about 0.0 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about 0.0 per unit of volatility. If you would invest  560.00  in BW Offshore Limited on September 18, 2024 and sell it today you would lose (5.00) from holding BW Offshore Limited or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Eastern Co  vs.  BW Offshore Limited

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

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

BW Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eastern and BW Offshore

The main advantage of trading using opposite Eastern and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co and BW Offshore Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.