Correlation Between Pacific Basin and American Shipping
Can any of the company-specific risk be diversified away by investing in both Pacific Basin and American Shipping 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 Pacific Basin and American Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Basin Shipping and American Shipping, you can compare the effects of market volatilities on Pacific Basin and American Shipping 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 Pacific Basin with a short position of American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Basin and American Shipping.
Diversification Opportunities for Pacific Basin and American Shipping
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pacific and American is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Basin Shipping and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Pacific Basin 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 Pacific Basin Shipping are associated (or correlated) with American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Pacific Basin i.e., Pacific Basin and American Shipping go up and down completely randomly.
Pair Corralation between Pacific Basin and American Shipping
Assuming the 90 days horizon Pacific Basin is expected to generate 88.17 times less return on investment than American Shipping. But when comparing it to its historical volatility, Pacific Basin Shipping is 9.58 times less risky than American Shipping. It trades about 0.02 of its potential returns per unit of risk. American Shipping is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 387.00 in American Shipping on August 30, 2024 and sell it today you would lose (151.00) from holding American Shipping or give up 39.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 84.82% |
| Values | Daily Returns |
Pacific Basin Shipping vs. American Shipping
Performance |
| Timeline |
| Pacific Basin Shipping |
| American Shipping |
Pacific Basin and American Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Basin and American Shipping
The main advantage of trading using opposite Pacific Basin and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Basin position performs unexpectedly, American Shipping 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 American Shipping will offset losses from the drop in American Shipping's long position.| Pacific Basin vs. American Shipping | Pacific Basin vs. EuroDry | Pacific Basin vs. Nippon Yusen Kabushiki | Pacific Basin vs. Euroseas |
| American Shipping vs. AP Moeller Maersk AS | American Shipping vs. AP Mller | American Shipping vs. AP Moeller | American Shipping vs. COSCO SHIPPING Holdings |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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