Correlation Between Aker ASA and American Shipping

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

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

Diversification Opportunities for Aker ASA and American Shipping

0.78

Correlation Coefficient

Aker ASA  American Shipping

Poor diversification

The 3 months correlation between Aker and American is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aker ASA and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and Aker ASA 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 Aker ASA 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 Aker ASA i.e., Aker ASA and American Shipping go up and down completely randomly.

Pair Corralation between Aker ASA and American Shipping

Assuming the 90 days trading horizon Aker ASA is expected to generate 1.59 times less return on investment than American Shipping. But when comparing it to its historical volatility, Aker ASA is 1.67 times less risky than American Shipping. It trades about 0.15 of its potential returns per unit of risk. American Shipping is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,270  in American Shipping on December 30, 2024 and sell it today you would earn a total of  500.00  from holding American Shipping or generate 22.03% return on investment over 90 days.

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

Aker ASA  vs.  American Shipping

Aker ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aker ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Aker ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

American Shipping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, American Shipping disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aker ASA and American Shipping

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

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.