Correlation Between Western Bulk and American Shipping
Can any of the company-specific risk be diversified away by investing in both Western Bulk 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 Western Bulk and American Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Bulk Chartering and American Shipping, you can compare the effects of market volatilities on Western Bulk 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 Western Bulk with a short position of American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Bulk and American Shipping.
Diversification Opportunities for Western Bulk and American Shipping
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and American is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Western Bulk Chartering and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Western Bulk 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 Western Bulk Chartering 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 Western Bulk i.e., Western Bulk and American Shipping go up and down completely randomly.
Pair Corralation between Western Bulk and American Shipping
Assuming the 90 days horizon Western Bulk is expected to generate 106.08 times less return on investment than American Shipping. But when comparing it to its historical volatility, Western Bulk Chartering is 6.29 times less risky than American Shipping. It trades about 0.01 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 | Significant |
| Accuracy | 77.17% |
| Values | Daily Returns |
Western Bulk Chartering vs. American Shipping
Performance |
| Timeline |
| Western Bulk Chartering |
| American Shipping |
Western Bulk and American Shipping Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Bulk and American Shipping
The main advantage of trading using opposite Western Bulk and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Bulk 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.| Western Bulk vs. SITC International Holdings | Western Bulk vs. Pacific Basin Shipping | Western Bulk vs. SITC International Holdings | Western Bulk vs. Mitsui OSK Lines |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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