Correlation Between Analog Devices and BW Offshore

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

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

Diversification Opportunities for Analog Devices and BW Offshore

0.01

Correlation Coefficient

Analog Devices  BW Offshore

Significant diversification

The 3 months correlation between Analog and BWOFY is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices 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 Analog Devices 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 Analog Devices 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 Analog Devices i.e., Analog Devices and BW Offshore go up and down completely randomly.

Pair Corralation between Analog Devices and BW Offshore

Considering the 90-day investment horizon Analog Devices is expected to under-perform the BW Offshore. In addition to that, Analog Devices is 1.86 times more volatile than BW Offshore Limited. It trades about -0.17 of its total potential returns per unit of risk. BW Offshore Limited is currently generating about -0.18 per unit of volatility. If you would invest  572.00  in BW Offshore Limited on August 27, 2024 and sell it today you would lose (22.00) from holding BW Offshore Limited or give up 3.85% of portfolio value over 90 days.

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

Analog Devices  vs.  BW Offshore Limited

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

BW Offshore Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, BW Offshore showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and BW Offshore

The main advantage of trading using opposite Analog Devices and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.