Correlation Between International Seaways and BW LPG

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

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

Diversification Opportunities for International Seaways and BW LPG

0.91

Correlation Coefficient

International Seaways  BW LPG

Almost no diversification

The 3 months correlation between International and BWLP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding International Seaways and BW LPG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW LPG Limited and International Seaways 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 International Seaways are associated (or correlated) with BW LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW LPG Limited has no effect on the direction of International Seaways i.e., International Seaways and BW LPG go up and down completely randomly.

Pair Corralation between International Seaways and BW LPG

Given the investment horizon of 90 days International Seaways is expected to under-perform the BW LPG. But the stock apears to be less risky and, when comparing its historical volatility, International Seaways is 1.28 times less risky than BW LPG. The stock trades about -0.17 of its potential returns per unit of risk. The BW LPG Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,421  in BW LPG Limited on September 3, 2024 and sell it today you would lose (194.00) from holding BW LPG Limited or give up 13.65% of portfolio value over 90 days.

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

International Seaways  vs.  BW LPG Limited

International Seaways

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Seaways has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

BW LPG Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW LPG Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with International Seaways and BW LPG

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

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