Correlation Between Algoma Central and Western Bulk
Can any of the company-specific risk be diversified away by investing in both Algoma Central and Western Bulk 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 Algoma Central and Western Bulk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Central and Western Bulk Chartering, you can compare the effects of market volatilities on Algoma Central and Western Bulk 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 Algoma Central with a short position of Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Central and Western Bulk.
Diversification Opportunities for Algoma Central and Western Bulk
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Algoma and Western is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Central and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering and Algoma Central 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 Algoma Central are associated (or correlated) with Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of Algoma Central i.e., Algoma Central and Western Bulk go up and down completely randomly.
Pair Corralation between Algoma Central and Western Bulk
Assuming the 90 days horizon Algoma Central is expected to generate 0.39 times more return on investment than Western Bulk. However, Algoma Central is 2.55 times less risky than Western Bulk. It trades about 0.05 of its potential returns per unit of risk. Western Bulk Chartering is currently generating about -0.11 per unit of risk. If you would invest 1,019 in Algoma Central on September 24, 2024 and sell it today you would earn a total of 56.00 from holding Algoma Central or generate 5.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.21% |
Values | Daily Returns |
Algoma Central vs. Western Bulk Chartering
Performance |
Timeline |
Algoma Central |
Western Bulk Chartering |
Algoma Central and Western Bulk Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Algoma Central and Western Bulk
The main advantage of trading using opposite Algoma Central and Western Bulk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Central position performs unexpectedly, Western Bulk 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 Western Bulk will offset losses from the drop in Western Bulk's long position.Algoma Central vs. dAmico International Shipping | Algoma Central vs. Western Bulk Chartering | Algoma Central vs. AP Moeller | Algoma Central vs. AP Mller |
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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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