Correlation Between BW OFFSHORE and Mitsubishi Materials

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

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

Diversification Opportunities for BW OFFSHORE and Mitsubishi Materials

0.03

Correlation Coefficient

BW OFFSHORE  Mitsubishi Materials

Significant diversification

The 3 months correlation between XY81 and Mitsubishi is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BW OFFSHORE LTD and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials 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 LTD are associated (or correlated) with Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of BW OFFSHORE i.e., BW OFFSHORE and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between BW OFFSHORE and Mitsubishi Materials

Assuming the 90 days trading horizon BW OFFSHORE LTD is expected to generate 2.22 times more return on investment than Mitsubishi Materials. However, BW OFFSHORE is 2.22 times more volatile than Mitsubishi Materials. It trades about 0.05 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about 0.0 per unit of risk. If you would invest  217.00  in BW OFFSHORE LTD on September 14, 2024 and sell it today you would earn a total of  14.00  from holding BW OFFSHORE LTD or generate 6.45% return on investment over 90 days.

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

BW OFFSHORE LTD  vs.  Mitsubishi Materials

BW OFFSHORE LTD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BW OFFSHORE and Mitsubishi Materials

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

The idea behind BW OFFSHORE LTD and Mitsubishi Materials 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.