Correlation Between Clarkson PLC and American Shipping

Can any of the company-specific risk be diversified away by investing in both Clarkson PLC 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 Clarkson PLC and American Shipping into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clarkson PLC and American Shipping, you can compare the effects of market volatilities on Clarkson PLC 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 Clarkson PLC with a short position of American Shipping. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clarkson PLC and American Shipping.

Diversification Opportunities for Clarkson PLC and American Shipping

0.0

Correlation Coefficient

Clarkson PLC  American Shipping

Pay attention - limited upside

The 3 months correlation between Clarkson and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Clarkson PLC and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Clarkson PLC 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 Clarkson PLC 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 Clarkson PLC i.e., Clarkson PLC and American Shipping go up and down completely randomly.

Pair Corralation between Clarkson PLC and American Shipping

Assuming the 90 days horizon Clarkson PLC is expected to under-perform the American Shipping. But the stock apears to be less risky and, when comparing its historical volatility, Clarkson PLC is 1.2 times less risky than American Shipping. The stock trades about -0.14 of its potential returns per unit of risk. The American Shipping is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  232.00  in American Shipping on October 8, 2024 and sell it today you would lose (6.00) from holding American Shipping or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Clarkson PLC  vs.  American Shipping

Clarkson PLC

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Clarkson PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Clarkson PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Shipping

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clarkson PLC and American Shipping

The main advantage of trading using opposite Clarkson PLC and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clarkson PLC 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.

The idea behind Clarkson PLC and American Shipping 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.