Correlation Between Global Ship and Penta Ocean

Can any of the company-specific risk be diversified away by investing in both Global Ship and Penta Ocean 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 Penta Ocean 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 Penta Ocean Construction Co, you can compare the effects of market volatilities on Global Ship and Penta Ocean 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 Penta Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Penta Ocean.

Diversification Opportunities for Global Ship and Penta Ocean

-0.12

Correlation Coefficient

Global Ship  Penta Ocean

Good diversification

The 3 months correlation between Global and Penta is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Global Ship i.e., Global Ship and Penta Ocean go up and down completely randomly.

Pair Corralation between Global Ship and Penta Ocean

Assuming the 90 days horizon Global Ship Lease is expected to generate 1.1 times more return on investment than Penta Ocean. However, Global Ship is 1.1 times more volatile than Penta Ocean Construction Co. It trades about 0.05 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.0 per unit of risk. If you would invest  1,467  in Global Ship Lease on October 25, 2024 and sell it today you would earn a total of  591.00  from holding Global Ship Lease or generate 40.29% return on investment over 90 days.

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

Global Ship Lease  vs.  Penta Ocean Construction Co

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.

Penta Ocean Construc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Penta Ocean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Global Ship and Penta Ocean

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

The idea behind Global Ship Lease and Penta Ocean Construction Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.