Correlation Between Cool and StealthGas
Can any of the company-specific risk be diversified away by investing in both Cool and StealthGas 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 Cool and StealthGas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cool Company and StealthGas, you can compare the effects of market volatilities on Cool and StealthGas 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 Cool with a short position of StealthGas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cool and StealthGas.
Diversification Opportunities for Cool and StealthGas
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cool and StealthGas is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cool Company and StealthGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StealthGas and Cool 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 Cool Company are associated (or correlated) with StealthGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StealthGas has no effect on the direction of Cool i.e., Cool and StealthGas go up and down completely randomly.
Pair Corralation between Cool and StealthGas
Given the investment horizon of 90 days Cool Company is expected to under-perform the StealthGas. But the stock apears to be less risky and, when comparing its historical volatility, Cool Company is 1.09 times less risky than StealthGas. The stock trades about -0.05 of its potential returns per unit of risk. The StealthGas is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 714.00 in StealthGas on November 9, 2024 and sell it today you would lose (144.00) from holding StealthGas or give up 20.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cool Company vs. StealthGas
Performance |
| Timeline |
| Cool Company |
| StealthGas |
Cool and StealthGas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cool and StealthGas
The main advantage of trading using opposite Cool and StealthGas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cool position performs unexpectedly, StealthGas 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 StealthGas will offset losses from the drop in StealthGas' long position.| Cool vs. Primoris Services | Cool vs. Tritent International Agriculture | Cool vs. Mattel Inc | Cool vs. Hurco Companies |
| StealthGas vs. Danaos | StealthGas vs. Global Ship Lease | StealthGas vs. Euroseas | StealthGas vs. Navios Maritime Partners |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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