Correlation Between Sea and Global Ship
Can any of the company-specific risk be diversified away by investing in both Sea and Global Ship 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 Sea and Global Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Global Ship Lease, you can compare the effects of market volatilities on Sea and Global Ship 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 Sea with a short position of Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Global Ship.
Diversification Opportunities for Sea and Global Ship
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sea and Global is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease and Sea 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 Sea are associated (or correlated) with Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Sea i.e., Sea and Global Ship go up and down completely randomly.
Pair Corralation between Sea and Global Ship
Allowing for the 90-day total investment horizon Sea is expected to generate 3.69 times more return on investment than Global Ship. However, Sea is 3.69 times more volatile than Global Ship Lease. It trades about 0.06 of its potential returns per unit of risk. Global Ship Lease is currently generating about 0.05 per unit of risk. If you would invest 6,354 in Sea on August 31, 2024 and sell it today you would earn a total of 5,026 from holding Sea or generate 79.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. Global Ship Lease
Performance |
| Timeline |
| Sea |
| Global Ship Lease |
Sea and Global Ship Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Global Ship
The main advantage of trading using opposite Sea and Global Ship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, Global Ship 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 Global Ship will offset losses from the drop in Global Ship's long position.The idea behind Sea and Global Ship Lease 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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