Correlation Between American Shipping and Odfjell B

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Can any of the company-specific risk be diversified away by investing in both American Shipping and Odfjell B 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 American Shipping and Odfjell B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Shipping and Odfjell B, you can compare the effects of market volatilities on American Shipping and Odfjell B 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 American Shipping with a short position of Odfjell B. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Shipping and Odfjell B.

Diversification Opportunities for American Shipping and Odfjell B

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between American and Odfjell is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Shipping and Odfjell B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Odfjell B and American Shipping 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 American Shipping are associated (or correlated) with Odfjell B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Odfjell B has no effect on the direction of American Shipping i.e., American Shipping and Odfjell B go up and down completely randomly.

Pair Corralation between American Shipping and Odfjell B

Assuming the 90 days trading horizon American Shipping is expected to generate 0.61 times more return on investment than Odfjell B. However, American Shipping is 1.65 times less risky than Odfjell B. It trades about -0.15 of its potential returns per unit of risk. Odfjell B is currently generating about -0.17 per unit of risk. If you would invest  2,905  in American Shipping on August 31, 2024 and sell it today you would lose (180.00) from holding American Shipping or give up 6.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

American Shipping  vs.  Odfjell B

 Performance 
       Timeline  
American Shipping 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Odfjell B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

American Shipping and Odfjell B Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Shipping and Odfjell B

The main advantage of trading using opposite American Shipping and Odfjell B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Shipping position performs unexpectedly, Odfjell B 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 Odfjell B will offset losses from the drop in Odfjell B's long position.
The idea behind American Shipping and Odfjell B 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.

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