Correlation Between First Steamship and Tze Shin

Can any of the company-specific risk be diversified away by investing in both First Steamship and Tze Shin 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 First Steamship and Tze Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Steamship Co and Tze Shin International, you can compare the effects of market volatilities on First Steamship and Tze Shin 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 First Steamship with a short position of Tze Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Steamship and Tze Shin.

Diversification Opportunities for First Steamship and Tze Shin

0.8

Correlation Coefficient

First Steamship  Tze Shin

Very poor diversification

The 3 months correlation between First and Tze is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Steamship Co and Tze Shin International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tze Shin International and First Steamship 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 First Steamship Co are associated (or correlated) with Tze Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tze Shin International has no effect on the direction of First Steamship i.e., First Steamship and Tze Shin go up and down completely randomly.

Pair Corralation between First Steamship and Tze Shin

Assuming the 90 days trading horizon First Steamship Co is expected to generate 0.78 times more return on investment than Tze Shin. However, First Steamship Co is 1.28 times less risky than Tze Shin. It trades about -0.3 of its potential returns per unit of risk. Tze Shin International is currently generating about -0.32 per unit of risk. If you would invest  758.00  in First Steamship Co on October 9, 2024 and sell it today you would lose (45.00) from holding First Steamship Co or give up 5.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

First Steamship Co  vs.  Tze Shin International

First Steamship

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Steamship Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Tze Shin International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tze Shin International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tze Shin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Steamship and Tze Shin

The main advantage of trading using opposite First Steamship and Tze Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Steamship position performs unexpectedly, Tze Shin 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 Tze Shin will offset losses from the drop in Tze Shin's long position.

The idea behind First Steamship Co and Tze Shin International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.