Correlation Between Matson and TOP Ships
Can any of the company-specific risk be diversified away by investing in both Matson and TOP Ships 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 Matson and TOP Ships into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matson Inc and TOP Ships, you can compare the effects of market volatilities on Matson and TOP Ships 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 Matson with a short position of TOP Ships. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matson and TOP Ships.
Diversification Opportunities for Matson and TOP Ships
Excellent diversification
The 3 months correlation between Matson and TOP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Matson Inc and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships and Matson 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 Matson Inc are associated (or correlated) with TOP Ships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Ships has no effect on the direction of Matson i.e., Matson and TOP Ships go up and down completely randomly.
Pair Corralation between Matson and TOP Ships
Given the investment horizon of 90 days Matson Inc is expected to generate 1.65 times more return on investment than TOP Ships. However, Matson is 1.65 times more volatile than TOP Ships. It trades about 0.17 of its potential returns per unit of risk. TOP Ships is currently generating about -0.1 per unit of risk. If you would invest 13,332 in Matson Inc on August 31, 2024 and sell it today you would earn a total of 1,976 from holding Matson Inc or generate 14.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Matson Inc vs. TOP Ships
Performance |
| Timeline |
| Matson Inc |
| TOP Ships |
Matson and TOP Ships Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matson and TOP Ships
The main advantage of trading using opposite Matson and TOP Ships positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matson position performs unexpectedly, TOP Ships 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 TOP Ships will offset losses from the drop in TOP Ships' long position.The idea behind Matson Inc and TOP Ships 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.| TOP Ships vs. Oceanpal | TOP Ships vs. Safe Bulkers | TOP Ships vs. Safe Bulkers | TOP Ships vs. Safe Bulkers |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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