Correlation Between Global Ship and GOODTECH ASA

Can any of the company-specific risk be diversified away by investing in both Global Ship and GOODTECH ASA 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 Global Ship and GOODTECH ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Ship Lease and GOODTECH ASA A, you can compare the effects of market volatilities on Global Ship and GOODTECH ASA 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 Global Ship with a short position of GOODTECH ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and GOODTECH ASA.

Diversification Opportunities for Global Ship and GOODTECH ASA

0.19

Correlation Coefficient

Global Ship  GOODTECH ASA

Average diversification

The 3 months correlation between Global and GOODTECH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and GOODTECH ASA A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODTECH ASA A and Global Ship 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 Global Ship Lease are associated (or correlated) with GOODTECH ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODTECH ASA A has no effect on the direction of Global Ship i.e., Global Ship and GOODTECH ASA go up and down completely randomly.

Pair Corralation between Global Ship and GOODTECH ASA

Assuming the 90 days horizon Global Ship Lease is expected to under-perform the GOODTECH ASA. But the stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 1.06 times less risky than GOODTECH ASA. The stock trades about -0.05 of its potential returns per unit of risk. The GOODTECH ASA A is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  86.00  in GOODTECH ASA A on October 25, 2024 and sell it today you would lose (1.00) from holding GOODTECH ASA A or give up 1.16% of portfolio value over 90 days.

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

Global Ship Lease  vs.  GOODTECH ASA A

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

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

GOODTECH ASA A

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Ship and GOODTECH ASA

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

The idea behind Global Ship Lease and GOODTECH ASA A 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.