Correlation Between Global Ship and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Global Ship and ARMOUR Residential 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 Global Ship and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and ARMOUR Residential REIT, you can compare the effects of market volatilities on Global Ship and ARMOUR Residential 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 Global Ship with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and ARMOUR Residential.
Diversification Opportunities for Global Ship and ARMOUR Residential
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and ARMOUR is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and Global Ship 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 Global Ship Lease are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Global Ship i.e., Global Ship and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Global Ship and ARMOUR Residential
Assuming the 90 days trading horizon Global Ship is expected to generate 2.15 times less return on investment than ARMOUR Residential. But when comparing it to its historical volatility, Global Ship Lease is 1.69 times less risky than ARMOUR Residential. It trades about 0.16 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,129 in ARMOUR Residential REIT on November 2, 2024 and sell it today you would earn a total of 65.00 from holding ARMOUR Residential REIT or generate 3.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Global Ship Lease |
| ARMOUR Residential REIT |
Global Ship and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and ARMOUR Residential
The main advantage of trading using opposite Global Ship and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Global Ship vs. Safe Bulkers | Global Ship vs. Diana Shipping | Global Ship vs. Costamare | Global Ship vs. Safe Bulkers |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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