Correlation Between REC Silicon and American Shipping
Can any of the company-specific risk be diversified away by investing in both REC Silicon 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 REC Silicon and American Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REC Silicon ASA and American Shipping, you can compare the effects of market volatilities on REC Silicon 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 REC Silicon with a short position of American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of REC Silicon and American Shipping.
Diversification Opportunities for REC Silicon and American Shipping
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between REC and American is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and REC Silicon 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 REC Silicon ASA 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 REC Silicon i.e., REC Silicon and American Shipping go up and down completely randomly.
Pair Corralation between REC Silicon and American Shipping
Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the American Shipping. In addition to that, REC Silicon is 4.97 times more volatile than American Shipping. It trades about -0.3 of its total potential returns per unit of risk. American Shipping is currently generating about -0.03 per unit of volatility. If you would invest 2,803 in American Shipping on September 1, 2024 and sell it today you would lose (38.00) from holding American Shipping or give up 1.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
REC Silicon ASA vs. American Shipping
Performance |
| Timeline |
| REC Silicon ASA |
| American Shipping |
REC Silicon and American Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REC Silicon and American Shipping
The main advantage of trading using opposite REC Silicon and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC Silicon 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.| REC Silicon vs. Aker Horizons AS | REC Silicon vs. MPC Container Ships | REC Silicon vs. Aker Carbon Capture | REC Silicon vs. Nordic Semiconductor ASA |
| American Shipping vs. Aker Horizons AS | American Shipping vs. REC Silicon ASA | American Shipping vs. Kongsberg Automotive Holding | American Shipping vs. Aker Carbon Capture |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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