Correlation Between AP Moeller and Pacific Basin
Can any of the company-specific risk be diversified away by investing in both AP Moeller and Pacific Basin 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 AP Moeller and Pacific Basin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AP Moeller and Pacific Basin Shipping, you can compare the effects of market volatilities on AP Moeller and Pacific Basin 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 AP Moeller with a short position of Pacific Basin. Check out your portfolio center. Please also check ongoing floating volatility patterns of AP Moeller and Pacific Basin.
Diversification Opportunities for AP Moeller and Pacific Basin
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between AMKAF and Pacific is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller and Pacific Basin Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Basin Shipping and AP Moeller 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 AP Moeller are associated (or correlated) with Pacific Basin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Basin Shipping has no effect on the direction of AP Moeller i.e., AP Moeller and Pacific Basin go up and down completely randomly.
Pair Corralation between AP Moeller and Pacific Basin
Assuming the 90 days horizon AP Moeller is expected to generate 0.87 times more return on investment than Pacific Basin. However, AP Moeller is 1.15 times less risky than Pacific Basin. It trades about 0.05 of its potential returns per unit of risk. Pacific Basin Shipping is currently generating about 0.04 per unit of risk. If you would invest 130,606 in AP Moeller on August 27, 2024 and sell it today you would earn a total of 29,411 from holding AP Moeller or generate 22.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.74% |
| Values | Daily Returns |
AP Moeller vs. Pacific Basin Shipping
Performance |
| Timeline |
| AP Moeller |
| Pacific Basin Shipping |
AP Moeller and Pacific Basin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AP Moeller and Pacific Basin
The main advantage of trading using opposite AP Moeller and Pacific Basin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller position performs unexpectedly, Pacific Basin 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 Pacific Basin will offset losses from the drop in Pacific Basin's long position.| AP Moeller vs. Hapag Lloyd Aktiengesellschaft | AP Moeller vs. Hapag Lloyd Aktiengesellschaft | AP Moeller vs. AP Moeller Maersk AS | AP Moeller vs. SITC International Holdings |
| Pacific Basin vs. AP Mller | Pacific Basin vs. COSCO SHIPPING Holdings | Pacific Basin vs. Orient Overseas Limited |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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