Correlation Between AP Moeller and American Shipping

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

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

Diversification Opportunities for AP Moeller and American Shipping

-0.53

Correlation Coefficient

AP Moeller  American Shipping

Excellent diversification

The 3 months correlation between AMKBY and American is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding AP Moeller Maersk AS and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping and AP Moeller 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 AP Moeller Maersk AS 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 AP Moeller i.e., AP Moeller and American Shipping go up and down completely randomly.

Pair Corralation between AP Moeller and American Shipping

Assuming the 90 days horizon AP Moeller Maersk AS is expected to generate 1.32 times more return on investment than American Shipping. However, AP Moeller is 1.32 times more volatile than American Shipping. It trades about 0.11 of its potential returns per unit of risk. American Shipping is currently generating about -0.11 per unit of risk. If you would invest  724.00  in AP Moeller Maersk AS on September 5, 2024 and sell it today you would earn a total of  139.00  from holding AP Moeller Maersk AS or generate 19.2% return on investment over 90 days.

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

AP Moeller Maersk AS  vs.  American Shipping

AP Moeller Maersk

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AP Moeller Maersk AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, AP Moeller showed solid returns over the last few months and may actually be approaching a breakup point.

American Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AP Moeller and American Shipping

The main advantage of trading using opposite AP Moeller and American Shipping positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AP Moeller 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 AP Moeller Maersk AS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.